Australian superannuation is an exceptional retirement savings system in the World.
Employees including self-employed persons become members of superannuation funds; they make compulsory and voluntary contributions to the funds; the contributions are invested by the funds over the employees’ working life and finally the sum of the contributions plus earnings minus taxes and fees are paid as an income stream or lump sum to the contributors when they retire.
There are various types of superannuation funds in the industry. Retail Funds offer superannuation products to general public. Industry Funds draw members from the employees of a range of employers across an industry.
Public Sector Funds have a government agency or government-owned corporation as their sponsoring entity. Corporate Funds are sponsored by one or more employers and generally focus on the employees of a particular company or company group.
Lastly, Small Funds sector comprises Self-Managed Superannuation Funds (SMSFs) and Small APRA-regulated Funds (SAFs). Both SMSFs and SAFs can have a maximum of 4 members and all other funds have more than 4 members.
The total number of superannuation fund with more than 4 members were 202 at the end of June 2018, including 24 corporate funds, 39 industry funds, 18 public sector funds and 121 retail funds. There were 596,225 SMSFs as of 30 June 2018, an increase of 2.5 per cent from the total funds of 581,720 as at 30 June 2017. Small-APRA regulated funds totalled 1,983 in the same year, compared to 1,951 funds in 2017.
The Australian Prudential Regulatory Authority (APRA) is the prudential regulator for the superannuation industry including other entities in the financial services sector such as banks, credit unions, general insurance, reinsurance, life insurance, private health insurance, building societies and friendly societies.
Unlike other superannuation entities, SMSFs are regulated by the Australian Taxation Office (ATO).
Australian superannuation industry is one of the largest in the world. According to APRA, the total assets of the superannuation industry was $2.7 trillion as of 30 June 2018, an increase of 7.9 per cent from an amount of $2.5 trillion as at 30 June 2017.
MySuper is a no frills product in the superannuation industry and the total assets in this product was $675.6 bill ion at the end of the financial year ended 30 June 2018.
Over the 12 months from June 2017, there was an increase of 13.6 per cent in the total assets of MySuper product, from an amount of $594.9 billion in June 2017. AS at 30 June 2018, the assets of SMSFs totalled $749.9 billion, a rise of 6.4 per cent over the total assets of $704.6 in June 2017.
The superannuation industry financially performed well in the year ended 30 June 2018, although it was a bit less than the average rate of return in the last 5 years. In this year, the industry-wide annual rate of return for funds with more than 4 members was 7.6 per cent and the average rate of return was 7.9 per cent over the last 5 years, from June 2013 to June 2018.
In the quarter ended 30 June 2018, 51.3 per cent of the funds were invested in equities with 24.1 per cent in international listed equities, 23.4 per cent in Australian listed equities and 3.8 per cent in unlisted equities; fixed income and cash investments accounted for 31.5 per cent with 21.2 per cent in fixed income and 10.3 per cent in cash; property and infrastructure accounted for 13.5 per cent and 3.7 per cent were invested in other assets including hedge funds and commodities.