Australia's 'super' superannuation model

Ask executives from major Hong Kong-based financial groups where they've been flying since the hub lifted coronavirus restrictions

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Anthony Curry

Ask executives from major Hong Kong-based financial groups where they've been flying since the hub lifted its coronavirus restrictions, and an overwhelming number will answer Melbourne. It is well known that the mining giant BHRP is based in this city, which is a self-proclaimed coffee capital and maintains high-quality restaurants. On top of that, it is home to some of the country's largest pension funds, which have plenty of capital for investment activities and are growing rapidly. The pension savings system, called Superannuation or, simply, super, has assets under management of almost 3.5 trillion. Australian dollars (US$2.4 trillion as of March 31), which means it pales in comparison to its combined market capitalization of A$2.3 trillion. of Australian dollars of all listed groups on the country's Stock Exchange. It is one of the top five retirement savings mechanisms on the planet, according to OECD data. Not bad for a nation ranked 55th in population. The industry's total assets are swelling rapidly and are set to double to nearly $6.5 trillion. Australian dollars by 2030, according to official projections. This will make them the biggest players internationally in terms of assets under management, led by AustralianSuper and the Australian Retirement Trust (ART), bringing them on a par with California pension body CalPERS and its Pension Investment Board Canada.

With assets under management of the order of 2.4 trillion. dollars, it is in the top five of the world.

The industry owes its rapid growth to a 1992 law that required employers to withhold 3% of gross pay for nearly all staff over 18. The contribution has increased over time to 11% and will rise to 12% in 2025. Individual employees can also add their own contributions. Taxation on employer and individual contributions generates approximately 5% of federal tax revenue. Most of this capital is available on the international market, helping to make Australia a net exporter of capital over the past ten years. About 40% of the 2.4 trillion of Australian dollars, managed by investment houses and organizations, are denominated in foreign stocks and bonds, according to data from the relevant authorities (APRA). Pension funds also pour cash into unlisted companies. AustralianSuper owns 70% of Coal Drops Yard, a new shopping and dining center next to King's Cross station in London. ART has stakes in Heathrow and Edinburgh airports.

However, pension assets remain relatively fragmented, although around 60 mergers since 2011 have helped create eight companies that each manage more than 100 billion Australian dollars, so more than half of all funds managed by the industry as a whole. The fact that in many cases the average age of the insured does not reach 40 years and the flow of contributions continues, this enables the funds not to pay pensions for years, hence they participate in business deals and infrastructure projects. However, before they decide that they have found the “golden hen”, let them examine the regulatory rules: the authorities measure the returns of the funds annually and if they deviate from the target by more than 50 points, they are prohibited from accepting new clients for two years.

Source: www.kathimerini.com.cy

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