they approach retirement). A maximum of $540,000 over three years can be
contributed after tax. Concessional taxation necessitates such caps.
The superannuation savings of the vast majority of Australians, comprising
around 29.7 million accounts and $1.26 trillion in early 2015, are held in one
or more of almost 300 competing funds. These vary considerably in size,
origin, and investment approach; but all are trusts, regulated by the Australian
Prudential Regulation Authority (APRA). Under the Superannuation Industry
Supervision Act 1993, trustees must manage the accumulations in the best
interest of fund members, with the sole purpose of maximizing their ultimate
retirement incomes. The trustees typically invest in domestic and foreign
shares, bonds, cash, and property, on the advice of investment managers
and asset consultants.
‘Industry’ funds, which have trustees drawn from trade unions and
employer associations from a particular industry, managed around $437 bil-
lion across forty-four funds in 2015.^12 Almost 150‘retail’funds, which are for-
profit and typically established by largefinancial institutions, managed $546
billion. Larger funds dominate—in 2014 the biggest industry and retail funds,
respectively, were Australian Super ($64.9 billion) and AMP ($58.2 billion).
A recent inquiry found around 80 per cent of these APRA-regulated super-
annuation funds held only around 20 per cent of assets. Public sector and
corporate funds, which are not open to the general public, managed the
balance of the APRA-regulated funds.
Industry and retail funds compete with each other and with what are
known as‘self-managed superannuation funds’(SMSFs), which have grown
rapidly to become the largest part of the market. As their name suggests, the
members of a SMSF are also its trustees. Each such trust may have no more
than four members. They appeal to older, wealthier, andfinancially astute
Australians who want to personally oversee investment of their retirement
savings. They report to the Australian Taxation Office rather than APRA; their
total assets by 2015 had more than quadrupled over ten years to just under
$600 billion spread across 550,000 accounts (each typically with husband and
wife members). SMSF average balances of around $1 million dwarf averages of
under $40,000 in industry and retail funds.
For Australians born before 1960 superannuation savings can be accessed at
age 55, rising to age 60 for individuals born in 1964 and after.^13 In 2012,
average superannuation balances at retirement were around $200,000 for
men, around twice that of women. Withdrawals and earnings are tax free for
(^12) In 2015 the government moved to ensure one-third of directors of all such public offer
superannuation funds were‘independent’, part of a push to apply the same governance
standards to super funds as those that prevail for listed companies. 13
Early access to maximum value of $10,000 is permitted in cases of severefinancial hardship.
Adam Creighton