AustralianSuper
AustralianSuper is the largest superannuation fund in Australia, formed in 2006 through the merger of the Australian Retirement Fund (ARF) and the Superannuation Trust of Australia (STA). Serving over 2.2 million members, it manages assets that reached approximately $119 billion by 2017. The merger aimed to enhance economies of scale, diversify investment options, and lower operational costs, positioning AustralianSuper as a leader in the superannuation sector. The fund is governed by a board representing various stakeholders, and it operates by insourcing financial services, which helps minimize costs for its members. Since its establishment, AustralianSuper has demonstrated strong growth, achieving significant returns on investments and earning recognition as Australia’s Most Trusted Brand in its category multiple times. Its approach focuses on maximizing profitability while reducing expenses, contributing to the financial security of its members. With a commitment to responsible investment, AustralianSuper continues to navigate economic challenges while fostering member growth.
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AustralianSuper
Date founded: 1 July 2006
Industry: Finance
Corporate headquarters: Melbourne, Australia
Type: Public
AustralianSuper is the largest superannuation fund in Australia. It was born of the 2006 merger between the Australian Retirement Fund (ARF) and the Superannuation Trust of Australia (STA). With assets that by 2017 reached some $119 billion, AustralianSuper provides comprehensive retirement savings for more than 2.2 million Australians. According to its founders, the merger and resulting super fund took place to provide better economy of scale, increase brand recognition and lower costs.
AustralianSuper was part of a trend of smaller businesses merging and providing more options to participating customers. AustralianSuper's leadership, rejecting the sceptical point of view that the super fund's size would be its undoing, focused on the volume and diversity of the resulting fund's services rather than its breadth. Like other super funds, AustralianSuper is governed by a board of directors representing employers, employees and shareholders, and insources its financial services (rather than pay commissions to external financial planners). This policy enables AustralianSuper to provide to members comprehensive and high-quality services and mitigate costs.
Immediately after the 2006 merger, AustralianSuper's returns were realised quickly. The super fund's asset growth and cost reductions continue to strengthen AustralianSuper's leadership in superannuation. Each year from 2012 through 2017, consumers voted the super fund Australia's Most Trusted Brand in the superannuation category for Reader's Digest Australia.
History
Australia first provided funds for qualifying pensioners with the Invalid and Old Age Pensions Act 1908. However, only about one-third of Australian workers were covered by 1974. In 1983 the Australian Labor Party and the Australian Council of Trade Unions entered a major accord, launching a wave of federal labour legislation mandating family leave, wage indexing and expanded occupational superannuation. Three years later, in 1986, a second phase of the accord established award superannuation, requiring employers to contribute 3 per cent towards the retirement of their workers. Despite High Court challenges by the Confederation of Australian Industry and other employer groups, it became law. Amid these policy changes the Australian Retirement Fund (ARF) was founded in 1985, and the Superannuation Trust of Australia (STA) in 1987.
Throughout the 1990s the rules and tax structures surrounding superannuation were constructed and modified to reflect economic growth and fiscal trends. For instance, the 1991 federal budget included the Superannuation Guarantee, which mandated that employers had to contribute 3 per cent towards retirement for workers earning at least $5400 per year. Employers could deposit their pension contributions into an increasing number of fund options.
In 2005 Ian Silk and Mark Delaney, chief executives of ARF and STA, respectively, followed a national trend and announced that their companies would merge; the merger was completed on 1 July 2006. They were also joined by Financial Services Super (FINSUPER), which had agreed to merge with STA in October 2005. Their reasoning was simple: a merger would enhance economy of scale, give members more diverse investment options and increase portfolio profitability through cost savings. Sceptics warned that such a major merger would prove counterproductive.
Disproving the critics, AustralianSuper showed tremendous growth over the course of its first decade. The super fund acquired other funds, including the IBM Australia Limited Superannuation Fund in 2012 and AGEST in 2013. Whereas other funds relied on external financial consultants and salespeople on commission (on top of the fund's normal costs), AustralianSuper utilised its own fund managers for much of its investment portfolio, providing a major cost savings. In 2012 the company announced a goal of insourcing 30 per cent of its portfolio. AustralianSuper's reported assets in 2017 were $119 billion, and one in ten Australians identified as members. According to its 2016–17 annual report, the fund's Balanced Investment option alone saw an increased net return of more than 12 per cent while retirement income for AustralianSuper members reached 13.6 per cent returns. This represented the eighth year of growth.
Impact
AustralianSuper is a member-driven superannuation fund that has not only maximised profitability but reduced costs, which are typically passed along to employers and their employees. When it was established in 2006, the $20 billion company immediately served 1.2 million public members, promising myriad responsible investment opportunities that would provide to pensioners a strong return. Since then AustralianSuper has weathered a worldwide recession and an Asian real estate bubble, utilising its global market activity to foster continued pension growth.
Insourcing has played a major role in the super fund's success. By absorbing most of the costs normally paid to financial consultants (which would weigh against the fund's overall performance and ultimately affect the return for members), and by streamlining administration, AustralianSuper proved adept at attending to member investments rather than bureaucracy.
Bibliography
"About Us." AustralianSuper, 2017, www.australiansuper.com/about-us. Accessed 9 Oct. 2017.
Alembakis, Rachel. "'Superfund' Being Created through Australian Merger." Pensions & Investments, 26 June 2006, www.pionline.com/article/20060626/PRINT/606260708/x2018superfundx2019-being-created-through-australian-merger. Accessed 9 Oct. 2017.
"AustralianSuper's Story: Preparing for a Retail Super World." Investor Strategy News, 22 Jan. 2014, www.ioandc.com/australiansupers-story-preparing-for-a-retail-super-world. Accessed 9 Oct. 2017.
Delivering More: 2016-2017 Annual Report. AustralianSuper, 2017, www.australiansuper.com/-/media/australian-super/files/about-us/annual-reports/2017-annual-report.pdf. Accessed 9 Oct. 2017.
"History of Unions." Australian Council of Trade Unions, 2017, www.actu.org.au/about-the-actu/history. Accessed 9 Oct. 2017.
Lampe, Anne. "Super-Sized: Two Industry Funds Agree to $13bn Merger." The Sydney Morning Herald, 6 May 2005, www.smh.com.au/news/Business/Supersized-two-industry-funds-agree-to-13bn-merger/2005/05/05/1115092628755.html. Accessed 9 Oct. 2017.
Nielson, Leslie, and Barbara Harris. "Chronology of Superannuation and Retirement Income in Australia." Parliament of Australia, 1 June 2010, www.aph.gov.au/About‗Parliament/Parliamentary‗Departments/Parliamentary‗Library/pubs/BN/0910/ChronSuperannuation. Accessed 9 Oct. 2017.
Michael P.Auerbach, MA