Understanding the continued growth of Australia’s superannuation industry
Australia’s superannuation system is one of the fastest-growing institutional pools of capital globally. Currently with A$4.2 trillion (as at March 2025) in assets and expected to exceed A$13.5 trillion by 2045.
Underpinning its growth is the sustained accumulation phase, underpinned by a defined contribution (DC) model rather than a defined benefit (DB) structure, supported by compulsory contributions under the super guarantee and demographics/immigration. This growth dynamic creates a consistent flow of new capital and a system inherently open to new investment strategies, products, and partnerships.
Source: ASFA, Superannuation Statistics, March 2025.
Key features driving growth:
Compulsory Contributions
Superannuation is government mandated. Employers must contribute a fixed percentage of employees' salaries (Currently 11.5%, rising to 12% on 1 July 2025) under the Super Guarantee, creating a growing and reliable inflow of capital.Defined Contribution (DC) Model
Australia's system is almost entirely DC, so funds receive ongoing inflows from working members. This contrasts with the more static, liability-driven nature of DB systems seen elsewhere.Demographics and skilled immigration
Australia’s superannuation system is supported by strong demographic fundamentals. While many developed economies are facing ageing populations and shrinking workforces, Australia continues to benefit from relatively high population growth driven by both natural increase and sustained skilled immigration.
The growing and relatively youthful workforce ensures a steady stream of contributions into the system, reinforcing its accumulation phase. This, coupled with mandated employer contributions and rising participation rates, ensure demographic tailwinds position Australia’s pension pool for continued expansion, unlike many global peers that are contending with decumulation and funding pressures.
The window of opportunity for global asset managers
“The best time to begin engaging Australian institutional investors was at the industry’s inception 30 years ago. The next best time is now.”
Other large and sophisticated pension markets such as Japan and many in Europe, are already in decumulation mode, managing outflows from ageing populations and mature DB liabilities. Australia, in contrast, is still building and its largely a DC superannuation market, positioning it uniquely.
For fund managers considering market entry, the combination of growth, scale, regulatory transparency, and a maturing investor base makes Australia not just attractive, but increasingly essential.
How Australia compares to other major pension markets
Globally, Australia ranks as the fourth-largest pension market, behind the US, Canada and the UK. However, its structure and growth dynamics differ significantly from these peers, that will see it become the world’s second largest market during the 2030s, offering global fund managers a distinct opportunity.
United States
The US pension landscape is highly fragmented and includes both public and private DB plans, corporate 401(k)s, and IRAs. While the overall asset pool is vast, many traditional DB plans are closed to new members and in decumulation. Defined contribution plans dominate the private sector, but decision-making is often decentralised and intermediated. In contrast, Australia's super funds are more centralised, with fewer, larger players and clearer investment mandates.
United Kingdom
The UK has been shifting from DB to DC for some time. Auto-enrolment has supported growth in DC assets, but overall, the system is still navigating the legacy of DB liabilities. UK schemes tend to be more risk-averse, with a heavy focus on de-risking and liability management. Australia's system, by comparison, is still risk-seeking and focused on long-term growth.
Canada and the Netherlands
Both countries are known for sophisticated pension fund management and strong governance. Canada’s “Maple Eight” and Dutch schemes are leaders in internal management and long-term thinking. However, both systems are still largely DB and are experiencing more muted growth due to demographic trends. Australia’s advantage lies in its continued inflows, member choice, and the growing scale of its DC model.
Japan
Japan is one of the most mature pension markets globally, but it is in decumulation phase. The population is ageing rapidly, and many pension funds are managing persistent outflows. The Government Pension Investment Fund (GPIF), the largest in the world, is often compared with Australia’s mega-funds. However, unlike Australia’s diversified and independently governed super funds, GPIF is centrally managed with a more conservative mandate. Japanese pensions are also more limited in their allocation to private markets compared to their Australian counterparts.
Scandinavia
The pension systems in Sweden, Norway, and Denmark are well-governed and highly sophisticated, but structurally different from Australia. Most are in a mature or early decumulation phase, reflecting ageing populations and slower growth in contributions. The systems are largely defined benefit (DB) or hybrid in nature, with strong public components and limited member choice. In Denmark, ATP operates a hybrid model with DB-like guarantees, while Norway’s NBIM manages the nation’s oil fund rather than a traditional pension pool. Sweden has introduced more defined contribution (DC) elements through its premium pension system, but DB remains the dominant structure overall. Contributions are mandatory across the region, but the scale of inflows is smaller and less growth-oriented than in Australia.
How investment approaches differ: DB vs DC
Defined Benefit (DB) schemes
In a DB scheme, the fund promises a fixed retirement benefit to members, usually based on salary and years of service. The employer (or sponsor) bears the investment and longevity risk.
As a result, DB schemes tend to:
Focus on liability matching
Investments are designed to match future payouts, often through bonds or liability-driven investment (LDI) strategies.Prioritise capital preservation and income
With known future liabilities, there's a focus on managing volatility and ensuring predictable returns.Gradually de-risk over time
As the scheme matures, portfolios shift from growth assets (like equities or alternatives) toward lower-risk assets to protect funded status.Be sensitive to funding ratios
Investment decisions are influenced by the gap between assets and liabilities, which can be volatile due to interest rate movements.
Defined Contribution (DC) schemes
In a DC scheme, the retirement outcome depends on how much is contributed and how well the investments perform over time. The member bears the investment risk.
As a result, DC schemes tend to:
Emphasise long-term growth
Especially during the accumulation phase, portfolios are tilted toward higher-growth assets like equities, private markets, and alternatives.Have a longer investment horizon
Inflows are consistent, especially in mandatory systems like Australia's. This supports long-term strategies and allocations to illiquid assets.Be less liability-constrained
Without fixed payout obligations, investment strategies can be more flexible and growth-oriented.
Encourage lifecycle or target-date approaches
Portfolios are often designed to automatically reduce risk as members near retirement, balancing growth with capital preservation.
Why this matters for fund managers?
Managers pitching to DB schemes often need to demonstrate capital preservation, risk control, and liability awareness. Those targeting DC funds, particularly in high-growth systems like Australia’s, can position strategies around long-term growth and member outcomes.
Why Australia matters?
Australia’s system sits at the intersection of growth, scale, and openness to global investment ideas. With approximately 100 regulated super funds and a small group of outsized funds influencing the majority of flows, building strong relationships in this market can lead to meaningful long-term partnerships.
While other markets are focused on protecting capital or managing outflows, Australia is still looking to deploy capital. Given the size of the pool of capital accumulated in the system, flows are increasingly going offshore, into global markets. For fund managers with strong performance, ESG alignment, and the ability to articulate a clear value proposition, the opportunity is not just significant, it is strategic.
Turning opportunity into access
Despite its openness, the Australian superannuation market can be difficult to access. Industry consolidation has resulted in a small number of large, complex funds with sophisticated internal teams and multi-layered decision-making structures.
Within these organisations, there is often a clear distinction between the teams managing assets internally and those responsible for selecting and overseeing external managers. Understanding how these functions interact, and where influence lies, is essential for any fund manager looking to gain traction. This is where we, Global Investment Institute, add value.
Our private, invitation-only events are designed to connect leading asset managers with key decision makers of asset owner organisations. Through our education and thought leadership focused conferences asset managers are able to demonstrate their expertise, while capital allocators are able to come together in a collegiate setting to discuss the key issues they are grappling with and connect with peers and global investment experts. Our events provide a unique setting to learn, share insights and form lasting relationships. For global managers seeking to enter or deepen their understanding of and engagement in this market, it is one of the most effective ways to be seen, heard, and considered.
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