Australia pensions to reach US$4 trillion by 2030 with fewer funds

[SYDNEY] Australia’s pensions industry will grow to A$5.7 trillion (S$5.1 trillion) by the end of the decade as the number of funds declines because of mergers that will increasingly concentrate assets in the hands of fewer, bigger firms.

A study by Mercer showed the number of funds will decline to about 45 by 2030, from 75 currently, and that will drop further to about 30 by 2035. By 2050, there will be just 20 funds that control around A$15 trillion, the report released on Monday (Mar 23) estimated.

Australia’s pensions system, known locally as superannuation, is the world’s fourth largest and is projected to leap to second place in the coming years, as mandatory employer contributions help to build nest eggs for retirees. Into the next decade, however, more aging Australians are predicted to start drawing down on their savings, adding pressure on the cash flows of funds.

Mercer expects the average fund to quadruple in size to A$161 billion by 2035 as investment returns drive growth. Retirement products which provide an income to members drawing down from their pension currently comprise 18 per cent of assets and that’s projected to reach 25 per cent by 2035. BLOOMBERG