The $3 trillion hit to super to expedite industry changes

Between the economic depression and the government's early release of superannuation scheme, the future of Australia's superannuation sector is in flux.

The industry, which had invested assets valued at $3 trillion last year was projected to grow to nearly $10 trillion by 2040. That figure has now been revised significantly lower, projected to reach $7 trillion by 2040. The change is due to economic growth expectations that have changed due to the global pandemic. How that will end is still in flux.

While that figure is striking to anyone planning their retirement, it could have broader implications across the national economy because of the role super plays.

"Super funds are major investors in Australia's economy with investments spanning infrastructure, property, purchase of government bonds, company shares, agribusiness, seeding start-ups, and energy projects," says Rainmaker's executive director of research and compliance Alex Dunnin. "Three trillion dollars less in available capital could have major ramifications."

The models factor the recession, rising unemployment, lower super contribution levels, lower fund returns, and reduced population growth.

Despite the discrepancy, Dunnin says Australia's retirement system is still in a relatively strong position.

Expediting the reshaping of the super sector

Dunnin says that slower growth in super over the coming decades could expedite long-evident strategic shifts in the industry, including the increase in dominance of not-for-profit super over retail and SMSF offerings, as well as the proportion of superannuation savings owned by retirees.

"The contracting role of retail offerings in proportional terms is a transition that could fundamentally reset Australia's superannuation sector, wealth management and financial advice marketplace," says Dunnin.

"We are already seeing this play out with these sectors working hard to become much more efficient, lower their fees, develop new lines of business, new channels and platforms.

"This will fuel pressure for continued reform of Australia's superannuation policy."