Super at a Crossroads: Why Retail Funds Will Vanish by 2040
Australia’s super system is consolidating rapidly, actively shaped by regulation toward scale, compliance, and improved member outcomes, underpinned by future viability. This structural realignment is increasingly leaving Retail funds behind, which are now on a one-way trajectory to fade out.
In 2014, there were more than 200 super funds. By 2024, that number had fallen to 85. Projections for 2035 suggest only 15–20 will remain. APRA’s soft viability benchmark now sits at ~$30B in assets under management, and 60 of the 85 funds fall short of that threshold. As this consolidation accelerates, a clear rationale has emerged for why funds merge.
Mergers are executed to deliver on a combination of strategic pillars:
Regulatory efficiency - Reporting, performance benchmarking and SPS 515 (Strategic Planning & Member Outcomes) are significantly more manageable in large structures
Capability uplift – Internalised investment teams, advice platforms and tailored retirement solutions provide a competitive edge
Scale economics – Fixed costs can be spread across hundreds of thousands of members, enabling margin protection while maintaining competitive fees
The basis for these strategic pillars, however, is future viability, and some funds don’t make the cut.
Retail funds fall short in the merging landscape for three main reasons:
Ageing member base – Three major Retail funds have members with an average age over 50
Weak member pipeline – Accounts held by main accumulators, so members aged 35-54 have declined ~60% between 2015 and 2022
Persistent net outflows – Retail fund outflows are 5x higher than Industry funds
Most importantly, Retail funds have no organic path forward. No aligned employer base. No sector affinity. No pricing edge. Retail super won’t vanish overnight, but it will vanish, leaving behind a landscape of a handful of mega funds and a tail of Self-Managed Super Funds.
The implications are clear – survival requires action. For mid-sized funds, the choice is simple: consolidate, differentiate, or exit. For regulators and policymakers, the challenge is to manage an orderly wind-down of structurally unviable Retail funds while protecting member outcomes. And for Retail funds still above $30B, the clock is ticking. Scale alone won’t save them, only a strategic reinvention might.
Regardless of whether you operate in the superannuation sector or somewhere else, to win you need to ask yourself: “Are we still relevant or just surviving?”.
If that question hasn’t come up yet, it will. Curious to hear your view on how this applies to your sector - reach out to us!
