Superannuation is now very much super-sized. At December 2018 there was $2.6 trillion invested in super. That’s significantly more than the $1.8 trillion that could buy you Australia’s top 200 companies on the ASX. And with 9.5% of everyone’s wages being added each year, it’s projected to grow to $4.8 trillion by 2033.
There are also a lot of super funds. At 30 June 2018 there were 187 funds regulated by APRA, with a wide variety of shapes and sizes. The largest fund was managing assets worth $145 billion, and even the median fund (that is, the 94th biggest – the one in the middle of the list) was managing assets worth $2 billion. The smallest fund was managing just $744,000.
The Productivity Commission ran an inquiry into superannuation in 2018 and found that it can pay to be with one of the larger funds.
Evidence of economies of scale is compelling — larger fund size is strongly associated with lower average costs in the Australian superannuation system… Significant unrealised economies of scale remain. For example, annual cost savings of at least $1.8 billion could be realised if the 50 highest cost funds merged with the 10 lowest cost funds. The presence of these potential gains, particularly from further consolidation, reflects a lack of effective competition in the system.
So, collectively, Australians would be paying less fees if there were fewer, larger funds. But does that mean larger funds have delivered better performance and lower fees?
Scale benefits also manifest through increasing returns to scale. Net returns are positively related to size for not for profit funds. (No corresponding correlation was found for retail funds.) Stronger net returns among larger not for profit funds might be due to higher exposure to unlisted asset classes, but data limitations rule out strong conclusions. Larger funds do appear, however, to make better investment decisions within asset classes.
There is little evidence that realised economies of scale have systematically been passed through to members in the form of lower fees. Scale benefits may have been passed through in the form of member services or increases in reserves, or offset by the costs of meeting new regulatory requirements. And not for profit funds, on average, might have passed through some scale economies by investing more heavily in (higher cost) unlisted assets and obtaining higher returns. Data limitations preclude firm conclusions about the form of pass through of economies of scale, and thus how members are actually benefitting and whether they are benefitting in a form they value.
For further analysis on whether larger funds deliver better results see SuperGuide article Best performing super funds over 5 years (to September 2019).
Whatever your objectives, it pays to at least be aware of who the largest funds are as a point of reference when benchmarking your own fund.
In the following table you can find the 20 largest super funds, ranked according to the value of total assets under management as at 30 June 2018.
|Fund name||Total assets ($ billion)||Total number of member accounts||Average member account balance||Growth in number of member accounts||Fund type||RSE Regulatory classification|
|QSuper||103.8||581,117||$162,000||2%||Public Sector||Public offer|
|MLC Super Fund||81.3||1,168,651||$68,000||-6%||Retail||Public offer|
|Public Sector Superannuation Scheme||78.8||225,749||N/A||-1%||Public Sector||Non public offer|
|Colonial First State FirstChoice Superannuation Trust||77.2||777,042||$99,000||-1%||Retail||Public offer|
|First State Superannuation Scheme||75.2||788,507||$90,000||-1%||Public Sector||Public offer|
|Unisuper||71.8||441,920||$145,000||5%||Industry||Non public offer|
|Retirement Wrap (run by BT)||65.4||788,364||$82,000||-17%||Retail||Public offer|
|CSS Fund||65||114,940||N/A||-5%||Public Sector||Non public offer|
|Sunsuper Superannuation Fund||60.3||1,460,805||$38,000||26%||Industry||Public offer|
|AMP Superannuation Savings Trust||56.8||1,656,473||$34,000||-12%||Retail||Public offer|
|Retail Employees Superannuation Trust (REST)||53.8||2,012,589||$25,000||2%||Industry||Public offer|
|Military Superannuation & Benefits Fund No 1||51||179,071||N/A||0%||Public Sector||Non public offer|
|Health Employees Superannuation Trust Australia (HESTA)||48.9||872,299||$53,000||2%||Industry||Public offer|
|Construction & Building Unions Superannuation (CBUS)||47.2||783,348||$58,000||4%||Industry||Public offer|
|Wealth Personal Superannuation and Pension Fund (run by AMP)||42.3||289,857||$145,000||28%||Retail||Public offer|
|OnePath Masterfund||37.6||953,984||$39,000||0%||Retail||Public offer|
|HOSTPLUS Superannuation Fund||34.7||1,283,272||$26,000||15%||Industry||Public offer|
|IOOF Portfolio Service Superannuation Fund||27.8||322,015||$86,000||-5%||Retail||Public offer|
|Mercer Super Trust||24.4||247,806||$95,000||11%||Retail||Public offer|
Learn more about investment performance in the following SuperGuide articles:
- Best performing super funds over 1 calendar year (to December 2018)
- Best performing super funds over the last financial year (to June 2019)
- Best performing super funds over 15 calendar years
- Best performing super funds over 10 financial years
- Best performing super funds over 5 years (to September 2019)
- Best performing pension funds over 5 years (to September 2019)
- Super fund performance: Monthly returns to October 2019