Nick Kirwan, former policy director for the life assurance sector at the Financial Services Council, in Australia, says: "There's no crystallisation point, and they don't start switching you into cash or low risk funds as you approach retirement. With Super, you see most people's growth after they retire."
The pension funds are broken down into four main sectors:
- One closely associated with the unions and specific industries – the industry sector.
- The retail sector, where funds are run on a commercial basis and have a wide selection of investments.
- Public sector funds for public sector employees.
- Corporate funds, focused largely on a single employer, and closed to the public.
The industry funds are by far the largest segment, having amassed A$1.2tn as of last September, compared to A$668bn for public sector and A$690bn for retail; corporate funds amounted to A$57bn. The bulk of the rest at A$898bn is made up of small funds with less than seven members.
| Type of fund | Total assets (A$bn) | No. of funds | No. of accounts (March 2023) |
| Corporate | 57 | 9 | 0.2mn |
| Industry | 1,198 | 22 | 13.1mn |
| Public sector | 668 | 31 | 3mn |
| Retail | 690 | 72 | 6.5mn |
| Funds with less than 7 members | 878 | 611,670 | 1.1mn |
| Balance of statutory funds | 50 | ||
| Total | 3,541 | 24.0mn | |
| Source: Association of Superannuation Funds of Australia | |||
Kirwan says the union model has been so successful because people are often put into an industry super right from the very beginning of their working life: "If you work in a shop when you're a kid, you will probably join a union and will be part of the Rest (Retail Employees Superannuation trust fund); if you work in a bar or coffee shop you will probably join Hostplus".
Rest and Hostplus are the third and fourth largest Superannuation funds in Australia.
The Australian system works on inertia, in a similar way to AE, and people tend to be put into the default fund. This in itself has created problems of small pots, similar to the UK, and is something the Australian government has addressed with the concept of 'stapling'.
Kirwan says: "What happens is that you would join Woolworths (equivalent to UK Tesco) when 16 or 17 and do a bit of part-time work, your first employer is going to be in the retail sector unless you specify something specific. By default, [with stapling] you would stay with with the superfund you're currently in."
This means that if you start at a new employer, and don't want to choose a super fund, your new employer will 'staple' your contributions to the existing fund. If you do not have an account with any fund, and do not want to choose one, the employer will put you in a default fund. The idea is that the pension pot will follow you around as you move employers.
This therefore does create winners and losers, according to Kirwan, as people might ordinarily stay with the original default fund that they joined as a teenager, due again to inertia, although the ATO makes it extremely easy to switch pension fund.
He says: "You just go on the ATO website, you can see your superfund listed, and [you can ask] to put that fund into this one – it's a three minute job."
