Super system to hit $12.4tn by 2045

Australia's superannuation system is forecast to triple in size over the next two decades reaching $12.4 trillion by 2045, as sustainable retirement outcomes become the sector's defining challenge.

According to the latest edition of Deloitte's Dynamics of the Australian Superannuation System report, total net superannuation assets will grow from around $4 trillion in 2025 to $12.4 trillion by 2045, equivalent to approximately $7.5 trillion in today's dollars.

Deloitte actuarial consulting partner Andrew Boal said the industry's success would increasingly be measured by its ability to deliver sustainable retirement outcomes rather than simply accumulating assets.

"Australia's super system continues to grow strongly, but the real test is whether the system can translate that growth into sustainable retirement income and improved outcomes for members," Boal said.

"As balances rise, there is an urgent need for more sophisticated, fit-for-purpose retirement products that can balance income, flexibility and longevity protection for a much larger and more diverse retiree population," he said.

Diane Somerville, principal - superannuation at Deloitte predicts further consolidation across the sector, with the number of funds managing more than $100 billion expected to increase from 10 to 12. The top 25 APRA-regulated funds already control 97% of industry assets, while the top 10 account for almost three quarters of the market.

"We expect that there will be further rationalisation, with the few remaining corporate funds eventually moving into aligned public offer industry funds or retail master trusts. While some smaller funds will remain, we anticipate they will offer specialist investments or a targeted or niche member proposition to differentiate themselves," said Somerville.

Industry funds are expected to strengthen their dominance, increasing their share of total assets from around 45% today 55% by 2045, while retail funds and self-managed super funds are forecast to lose market share.

The report also warns the growing size of super funds will reshape Australia's investment landscape, with super funds' ownership of the Australian share market potentially approaching 50% if current asset allocation trends continue, increasing the need for greater offshore and alternative investment exposure.

Boal said member engagement would become increasingly important as millions of Australians approached retirement.

"Just as important will be how the funds engage with their members who are approaching or are in retirement, as it will not be easy for most members to navigate the complexity on their own to tailor their own portfolio of products and settings to meet their individual needs," he said.

The report also identifies digital capability, personified member engagement and retirement income solutions as the key battleground as funds compete for members in an increasingly concentrated market.