How the super industry is being transformed

5 min read
5 min read

Australia’s retirement industry is one of the world’s best, yet it continues to be transformed by the biggest suite of changes the industry has seen in the last two decades. 

The pace of change is happening so quickly, and across so many levels, that J.P. Morgan has launched the Future of Superannuation Report to help share the thoughts of industry leaders on the major pressure points and future opportunities.   

While merger activity has recently hit record levels since the Your Future, Your Super (YFYS) performance test was launched last year, a significant portion of the industry told us they expect this to accelerate. 

There were 15 mergers or alliances in the year to October 2021—the most activity ever seen in a single year— yet around 50 per cent of executives we surveyed believe there will be fewer than 75 funds by 2025, which would result in 100 of today’s funds disappearing.  

If the number of funds declines to fewer than 75 by 2025, this could consistently result in 20 mergers or more a year. 

Despite the continued focus on the creation of ‘mega funds,’ many executives still believe there will be a place for smaller, niche funds. For example, they may serve members who work in higher risk industries with particular needs, such as higher insurance. 

Investment innovation underpins sustainable retirement income   

The YFYS performance benchmark and APRA have been a driving force for consolidation with most of the 13 funds identified as underperformers already in the process of merging. 

The main reason funds are merging is to increase scale (83.9 per cent), followed by sustainability (58.9 per cent) and regulatory pressure (53.6 per cent), according to the report’s survey. 

However, the long-term impact of YFYS on investment strategies remains less certain. About three-quarters (76.8 per cent) of funds surveyed think the YFYS annual performance test will also result in more benchmark-like returns.  

This could add more pressure in an environment where inflation is showing signs of rising, which could depress future investment returns. Super funds have achieved strong long-term returns through innovative investment strategies such as unlisted infrastructure and private equity – they will now need to balance their existing strategies with the greater scrutiny of a performance test. 

Another investment strategy that continues to attract large funds is internalisation. Almost two-in-three surveyed funds (62 per cent) believe the insourcing investment trend is being driven primarily by cost reduction (fees are a component of the YFYS performance test). Although greater consideration should be placed on creating sustainable operating models with the added complexity in attracting and retaining talent across an increasingly competitive landscape. 

The regulatory hurdle gets higher  

Funds are ultimately judged on their ability to deliver sustainable retirement income for an estimated 16 million Australians.  

Yet our report showed funds don’t see this as their biggest challenge – almost two-thirds (64.2 per cent) of respondents cited new regulation requirements as their biggest challenge over the next three years. 

The YFYS performance test has attracted the most attention, but other components include fund account stapling (when workers change jobs to cut down on inadvertent multiple accounts), while trustees’ obligation to act in members’ best interest is now members’ best “financial” interests. 

This may affect industry funds more than previously thought, with survey respondents saying they will consider reducing sponsorship (55.3 per cent), corporate entertainment (42.7 per cent), and advertising (37.5 per cent). 

Funds must now also reveal their specific investments through Portfolio Holding Disclosure (PHD) laws while APRA’s Superannuation Data Transformation project is placing new data collection demands on funds.  

Almost four-in-five survey respondents (83 per cent) said PHD will not be an accurate or useful measure for fund members to make decisions, while three-in-four (75 per cent) think it will not be in members’ best financial interests. 

Funds invest in data, automation, people  

While funds are generally supportive that new regulations are driving best practice, they remain concerned about the associated impacts on costs, people, and overall outcomes to their members.  

Combined with a new investment environment of lower returns, funds are looking more closely at “operational alpha,” or ways to generate higher returns through greater efficiency. 

Funds are investing in data transformation (73.2 per cent), automation (69.6 per cent), and AI/Machine learning (21.4 per cent).  

The initial COVID-19 pandemic in March 2020 acted as a prompt for the industry to remove more manual processes and encourage straight through processing in response to people working from home. 

Work continues as funds collate even more diverse sources of data to generate new insights while removing manual touch points to free up staff to concentrate on higher value producing activities. 

 But while funds are investing in smarter ways of working, they are struggling to attract talent, particularly in areas such as data science where demand remains high. Almost one in three survey respondents (30.3 per cent) rated attracting and retaining talent as one of their biggest challenges in the next three years. 

While the super industry is facing momentous change, we remain confident that it will meet these challenges head on and continue delivering better retirement outcomes for all Australians. 

Download a copy of the full report here.

Picture of By Nick Paparo

By Nick Paparo

Head of Platform Sales - Securities Services, Australia and New Zealand

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Katie Miller is the Deputy CEO, Regulation, AUSTRAC and has strategic responsibility for AUSTRAC’s regulatory, policy and legal functions. 
Katie has extensive experience exercising regulatory functions and advising regulators at state and federal levels. Katie is a published author on issues involving regulation, law and technology and supports connections between government, practitioners, communities of practice and academia. 

Derek Thompson

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Best Selling Author, Podcast Host of 'Plain English'

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Few speakers can match Derek Thompson‘s ability to synthesize mega-trends in society, labor, economics, technology, and politics. Put another way: Derek trawls the data sets and does the forecasting and deep reporting necessary to help us better understand how we live, how we vote, how we spend, and how we work.

In his paradigm-shifting #1 New York Times bestseller, Abundance (co-written with Ezra Klein), this award-winning journalist reveals how our policies and culture have pushed us into a world of scarcity (not enough housing, workers, or progress)—and offers a radical new path towards a world where housing is affordable, energy is plentiful, and innovation flourishes across industries.

He shares a compelling vision of a future where we have more than enough for everybody, and a practical, actionable roadmap for how to get there. It starts with taking more risks, building more expansively, and recognizing that we all have the power to create a world of abundance. “Everything’s utopian until it’s reality,” he says.

Carmen Beverley-Smith

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Carmen joined APRA in March 2023 and holds the role of Executive Director, Life and Private Health Insurance and Superannuation.  

She has had an esteemed career in financial services, spanning over 25 years. She has held diverse leadership roles at Westpac and Commonwealth Bank of Australia, including across risk, transformation and change, product and portfolio development, and sales and service. 

Prior to joining APRA, she held the role of General Manager, Risk Transformation Delivery Integration at Westpac. This involved leading the group-wide implementation of a suite of solutions to uplift risk management capability and develop data, analytics and reporting. 

Carmen leads with a values-driven approach and a particular interest in developing and mentoring talent. 

She holds a Bachelor of Commerce and Accounting, is a certified Chartered Accountant and a Graduate of the Australian Institute of Company Directors. 

Amy C. Edmondson

Novartis Professor of Leadership and Management, Harvard Business School

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Amy C. Edmondson is the Novartis Professor of Leadership and Management at the Harvard Business School, a chair established to support the study of human interactions that lead to the creation of successful enterprises that contribute to the betterment of society.

Edmondson has been recognized by the biannual Thinkers50 global ranking of management thinkers since 2011, and most recently was ranked #1 in 2021 and 2023; she also received that organization’s Breakthrough Idea Award in 2019, and Talent Award in 2017.  She studies teaming, psychological safety, and organisational learning, and her articles have been published in numerous academic and management outlets, including Administrative Science Quarterly, Academy of Management Journal, Harvard Business Review and California Management Review. Her 2019 book, The Fearless Organization: Creating Psychological Safety in the Workplace for Learning, Innovation and Growth (Wiley), has been translated into 15 languages. Her prior books – Teaming: How organizations learn, innovate and compete in the knowledge economy (Jossey-Bass, 2012), Teaming to Innovate (Jossey-Bass, 2013) and Extreme Teaming (Emerald, 2017) – explore teamwork in dynamic organisational environments. In Building the future: Big teaming for audacious innovation (Berrett-Koehler, 2016), she examines the challenges and opportunities of teaming across industries to build smart cities. 

Edmondson’s latest book, Right Kind of Wrong (Atria), builds on her prior work on psychological safety and teaming to provide a framework for thinking about, discussing, and practicing the science of failing well. First published in the US and the UK in September, 2023, the book is due to be translated into 24 additional languages, and was selected for the Financial Times and Schroders Best Business Book of the Year award.

Before her academic career, she was Director of Research at Pecos River Learning Centers, where she worked on transformational change in large companies. In the early 1980s, she worked as Chief Engineer for architect/inventor Buckminster Fuller, and her book A Fuller Explanation: The Synergetic Geometry of R. Buckminster Fuller (Birkauser Boston, 1987) clarifies Fuller’s mathematical contributions for a non-technical audience. Edmondson received her PhD in organisational behavior, AM in psychology, and AB in engineering and design from Harvard University.

 

Daniel Mulino MP

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Born in Brindisi, Italy, Daniel was a young child when he moved with his family to Australia. He grew up in Canberra and completed his first degrees – arts and law – at the ANU. He then completed a Master of Economics (University of Sydney) and a PhD in economics from Yale.

He lectured at Monash University, was an economic adviser in the Gillard government and was a Victorian MP from 2014 to 2018. As Parliamentary Secretary to the Treasurer of Victoria, Daniel helped deliver major infrastructure projects and developed innovative financing structures for community projects.

In 2018 he was preselected for the new federal seat of Fraser and became its first MP at the 2019 election, re-elected in 2022 and 2025. From 2022 to 2025, Daniel was chair of the House of Representatives’ Standing Economics Committee in which he chaired inquiries; economic dynamism, competition and business formation and insurers’ responses to 2022 major floods claims.

In 2025, he became the Assistant Treasurer and Minister for Financial Services.

In August 2022, Daniel published ‘Safety Net: The Future of Welfare in Australia’, which aims to explore the ways in which an insurance approach can improve the effectiveness of government service delivery.