Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 26

Superannuation emerges from a torrid period to more regulatory upheaval

The prominence of superannuation in Australia means superannuation funds administration is big business. Australia's funds management market is the fourth-largest in the world. Much of this is due to the nation's $1.5 trillion superannuation system, which ensures a steady flow of retirement savings. Both administrators and asset managers benefited from this steady flow of funds over the five years through 2012-13, a result of strong national employment and income. However, equity markets – and thus the total value of superannuation assets – were highly volatile.

Earnings recover after volatile time

A significant portion of superannuation assets is invested in Australian and international equities. After years of double-digit growth, the value of assets increased by just 4.9% in 2007-08 as the Global Financial Crisis began to hammer equity markets. A significant contraction occurred in 2008-09, and revenue earned by the superannuation industry followed, recording a double-digit decline. Although asset values have since recovered, it took two years to restore the lost ground. Ensuing market volatility was not helpful, with many funds reporting poor performance. However, strong stock market gains over 2012-13 resulted in healthy earnings for fund managers, which typically derive their revenue from management and performance fees, meaning income tracks in line asset values.

Superannuation industries are facing yet another wave of significant changes. The rollout of MySuper reform on 1 July 2013, coupled with an increase in the superannuation guarantee contributions, could set off several structural shifts in the related industries. MySuper is a standardised superannuation option similar to the traditional default option previously offered by superannuation funds. It is designed to be easily comparable across numerous funds and offer clients more transparency. As of 1 January 2014, employers will be required to nominate the MySuper option on behalf of their employees, unless the latter choose otherwise. Additionally, the superannuation guarantee contribution increased from 9.0% to 9.25% in July 2013. Although this is expected to come out of employers’ pockets, some workers may see a slight decline in their wages.

The sheer amount of funds in superannuation means that any changes are expected to affect both fund administrators and asset managers. While they both benefit from the increasing amount of funds in superannuation accounts, Australian managers charge the highest fees out of any developed country. However, this could change with MySuper regulation, as the Federal Government places increased restrictions on fees and charges. Additionally, managers will have to adjust to a larger number of self-managed super funds (SMSFs) bypassing them and investing directly in equity and debt markets.

The MySuper reform is a double-edged sword for the superannuation industry. On the one hand, it presents an opportunity to design new products that are suited to the distinctive features of the reform. On the other, super funds offering a MySuper option may select more passive investment strategies that do not require the high expertise of asset managers.

Banks looking for more involvement

The reforms are coming at a time when national and regional banks are seeking new growth opportunities within Australia. For these institutions, mortgage lending is the largest source of revenue, followed by corporate and other retail lending. Corporate lending has been weak, as business sentiment remains subdued, while household deleveraging weighs down retail lending. Therefore, the domestic growth of banks is essentially limited to the housing market.

Moving into superannuation management presents a big opportunity for banks. Although this trend has been occurring since the late 2000s, the banks are now trying to penetrate the superannuation asset management business, with limited success thus far. Banks are trying to cross-sell their superannuation products to their existing client bases. As well as providing superannuation accounts, banks provide trading platforms for SMSFs. These are designed to provide a wide range of services and be a complete one-stop shop for SMSF management. Ultimately, this may allow the banks to further tap into the $1.5 trillion of assets that need to be managed. To put this in perspective, the total value of superannuation assets now exceeds the total market capitalisation of the All Ordinaries in Australia.

Overall, the outlook for the superannuation management industry remains bright, but all participants need to be aware of challenges that could prevent them from capitalising on current opportunities. Similarly, banks need to be smart about the way they target their customers and make sure that their acquired superannuation businesses, such as Westpac’s BT Financial and the Commonwealth Bank’s Colonial First State, are effectively utilised.

 

IBISWorld is Australia’s best-known business information corporation providing research, analysis  and forecasts on over 500 industries, and has provided this summary of the current superannuation landscape exclusively for Cuffelinks.

 

  •   8 August 2013
  •      
  •   

 

Leave a Comment:

RELATED ARTICLES

2024/25 super thresholds – key changes and implications

$10 trillion manager moves into Australian superannuation

Review creates challenges for super outcomes

banner

Most viewed in recent weeks

How to minimise tax with a will

Inheritance tax implications in Australia may surprise some, as poor estate planning without proper wills or trusts can lead to costly tax bills and delays for beneficiaries.

Testamentary trusts post-budget: Estate planning, tax reform and the ‘death tax’ debate

Proposed Budget changes to taxation are casting new uncertainty over testamentary trusts, prompting closer scrutiny of estate planning structures and the real implications of reforms still taking shape.

Meg on SMSFs: The CGT changes don’t impact super but what about Div 296 tax decisions?

New CGT rules could tip the scales in the super vs non-super debate. For those facing the Division 296 tax, the case for withdrawing has gotten more complex. A "comparison rate" tool may help assess decisions.

High quality businesses are on sale

Beneath the dominance of the ASX's largest stocks, much of the market has been left behind. High-quality companies are now trading at levels rarely seen, offering opportunities for investors willing to look deeper.

The strange effect of the 30% minimum capital gains tax

The 30% minimum tax on capital gains sits at the heart of the budget's proposed reforms. Yet the mechanics reveal anomalies that introduce unexpected distortions that raise questions about its design.

Welcome to Firstlinks Edition 667 with weekend update

The downfall of the giant and three lessons for investors.

  • 18 June 2026

Latest Updates

Latest from Morningstar

Ranking three common retirement strategies

The defining challenge of retirement isn't just about building wealth, it's about converting your lifetime savings into sustainable income. A holistic understanding of different strategies can improve long-term outcomes.

Economy

Was life really better in the good old days?

Are we worse off than previous generations? Lately, there seems to be a heightened level of angst that economic conditions are getting harder and that the two-party political system (and maybe democracy too) is failing voters.

Retirement

Australia has saved $4.5 trillion for retirement. Here's what matters more

Most Australians approaching retirement can tell you the exact dollar value of their super account. But success depends on more than a sizeable balance. Here's four key questions to ask yourself at the start of the financial year. 

Who gains in an AI-supercharged economy?

AI is already reshaping the economy, but companies building transformative technologies rarely capture the greatest long-term value. Instead, those benefits accrue to the users. We may well see this pattern reproduced. 

Taxation

Div 296's million-dollar reset worth $25,000

The 'cost base reset' for the new super tax is being sold as protection for pre-July gains. A worked example shows $1M of protection is worth about $25,000, and the real deadline has not passed.

Latest from Morningstar

The forecasting fix that Wall Street missed

Asking whether markets are overpriced may be the wrong question. New research suggests that traditional valuation metrics used to forecast returns may have been misread. Here are five takeaways for investors.

Investment strategies

Should a fund manager invest their own money differently?

Investors often like the idea that fund managers should invest client money exactly as they invest their own. But reality is more complicated. Unique circumstances make a different approach rational and, at times, beneficial.

Sponsors

Alliances

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.