How super funds’ role in our economy is evolving
Let’s think through the role that superannuation plays in Australia.
Super was introduced because a few smart folks realised in the 1980s that the large cohort of young baby boomer workers would eventually retire.
Such a mass retirement would put unbearable pressure on the existing pension system. The financial foundation of retirement had to be reimagined. So, the super scheme was dreamt up.
Let’s force each worker to put a certain share of their income aside.
To make the pain of being forced to save your own money, Australians get taxed very little on their super savings. This way, most Australians will end up paying for their own retirement.
Personally, I remain a fan of the idea behind superannuation, even though I see some structural changes on the horizon.
Let’s put ourselves in the shoes of today’s superannuation system. Imagine you are handed a few trillion dollars and told to invest it for the long term. No quarterly panic. No hot money. Just decades of patient capital. What would you build?
That is not a hypothetical. It is the reality of Australia’s superannuation system.
Most Australians think of their super fund as a simple product – a place where their money goes, grows and eventually funds their retirement.
In that narrow sense, a super fund exists to maximise returns and minimise tax. But that view misses the bigger picture. Super funds are no longer just investment managers, they have become some of the most powerful economic actors in our economy.
Obvious role of super funds – grow the money
Super funds are legally required to act in the “best financial interests” of their members. That means they must invest contributions prudently, deliver strong, long-term, risk-adjusted returns while keeping member fees low.
They do all this while taking advantage of the concessional tax environment. That’s the core business of super funds and it matters enormously. Over a working life, small differences in returns compound into life-changing differences in your retirement balance.
You might like
If that was the whole story, super funds would only be boring ETFs with a tax advantage. They are far more.
The hidden layer – insurance and discipline
Every time a new young worker joins the super system, something else happens behind the scenes. The worker becomes part of a giant insurance scheme: Life cover, total and permanent disability, and income protection are the most common types of insurance products being provided through the super system.
In fact, millions of Australians are insured through their super without ever actively choosing a policy. That makes super funds some of the largest insurers in the country, whether we think of them that way or not.
Then there is the behavioural role. Super is not just about investing. It is about forcing people to save. The money is locked away. You cannot panic and sell during a downturn. You cannot spend your super savings on your midlife-crisis Porsche at 45. You are nudged into default options that quietly adjust your risk as you age.
Super protects us from our own worst financial instincts. That alone is worth a lot. While some individual investors might be able to outperform their superfunds, on a population level that is certainly not the case.
Super as the hidden economic power player
Now let’s zoom out. Australia’s super system already holds well over $4 trillion. That money has to go somewhere. The whole ASX (all Australian listed shares combined) is worth about a trillion dollars less than the super system.
Super funds must buy all types of stuff to invest our money. They buy airports, toll roads, renewable energy assets, office towers, logistics hubs and increasingly housing.
They are funding (and monetising) infrastructure that once upon a time governments paid for directly. To a degree, super funds decide what gets built.
Super funds are also among the largest shareholders in listed Australian companies, which gives them influence over how those companies are run.
At that scale, super funds are not just merry little participants in our national economy. They are shaping it.
If a major fund decides to tilt capital towards renewable energy, that speeds up the energy transition. If it favours logistics over retail, that reshapes commercial property markets. If it invests heavily offshore, that changes the flow of Australian capital globally.
No minister announces these decisions. No voter directly approves them. Yet their impact can rival public policy.
Who is responsible? Who is in charge?
Legally, super funds are not nation builders. They are fiduciaries – according to the old-fashioned dictionary that means they merely have the responsibility to take care of someone else’s money in a suitable way.
A super fund’s duty is to its members’ financial outcomes, not to broader social goals.
In practice, the line is blurring.
Governments talk about super funding housing supply. Industry groups talk about “patient capital” solving infrastructure gaps.
Funds themselves increasingly market their role in building Australia’s future. The expectation has shifted. Superannuation is no longer just about your retirement but about the country’s future.
Stay informed, daily
That creates tension and creates conflict. Should a super fund invest in affordable housing if it delivers slightly lower returns but broader social benefits? Should it prioritise domestic infrastructure over higher-yielding offshore assets? Should it take a view on climate, geopolitics or industrial policy?
These are not purely financial questions anymore. They are political ones. Yet they are being answered inside investment committees (who are tasked with growing your money) rather than parliaments (who are tasked with looking after the greater social good).
The demographic angle you’ve been waiting for
From a demographic perspective, the stakes are rising too.
Australia is ageing. The share of retirees is growing. That means super funds are gradually shifting from accumulation to drawdown. From growth to income. That complicates their investment strategies.
At the same time, the pool of capital keeps expanding as the millennials enter their mid-40s and reach the highest earning phase of their careers.
This creates a balancing act. Younger members want growth. Older members want stability and income. Trustees must serve both.
Layer on top the sheer scale of the assets owned by super funds and you end up with a system that is managing money across time and across generations. Super funds are effectively long-term custodians of Australia’s intergenerational wealth.
How should we think of super funds then?
We can describe a super fund an investment manager, a tax-effective savings vehicle, a group insurer and as a behavioural nudge system forcing us to prepare for retirement with every pay cheque. While all of that is true, it is also incomplete.
A more accurate description might be – super funds are fiduciary stewards of Australia’s mandatory savings pool, allocating capital at a scale that shapes the economy itself.
That is a very different beast from a traditional fund manager and leads to an uncomfortable question: If super funds are shaping the economy, who is shaping the super funds?
Members have limited engagement. Many people never change their default option. Governance is professionalised but distant. Political oversight exists but is indirect.
We have built a system that works remarkably well at generating retirement savings. But in doing so, we may have created a set of institutions with enormous, largely unexamined and uncoordinated economic influence.
It is tempting to reduce super to a simple equation – maximise returns, minimise tax.
That is still the scorecard that matters most for individuals. At a national level, something bigger is happening.
Australia has, almost by accident, created a class of investors with the time horizon, scale and stability to act like long-term planners of the economy.
Super funds are not elected, not quite public, and not purely private either. They are shadow economic planners shaping the future of Australia more directly every single year.
To be fair, super funds might disagree with my framing.
They would argue that they aren’t economic planners and have no intention of acting as such.
Their job is not to run industrial policy by stealth – they want only to act in the best financial interest of their members.
If they invest in housing, renewables, toll roads or offshore assets, they do so because the investment case stacks up, not because they are trying to shape the nation’s future.
That distinction matters. Super funds may have nation-shaping scale, but their mandate remains narrower than their influence.
Simon Kuestenmacher is a co-founder of The Demographics Group. His columns, media commentary and public speaking focus on current socio-demographic trends and how these impact Australia. His podcast, Demographics Decoded, explores the world through the demographic lens. Follow Simon on Twitter (X), Facebook, or LinkedIn.
Want to see more stories from InDaily SA in your Google search results?
- Click here to set InDaily SA as a preferred source.
- Tick the box next to "InDaily SA". That's it.
