Australia’s superannuation system has grown from a retirement safety net into a $4.5 trillion economic force — and managing it now demands a fundamentally different playbook.
Australia’s compulsory superannuation system was introduced in 1992 to provide financial security for Australians in retirement, and to build a national pool of savings.
But a “pool” is no longer an adequate descriptor for the capital managed by superannuation funds on. Today, that pool has become something far larger – an ocean of capital whose smooth and safe flow through the economy is now a matter of national importance.
The latest APRA Quarterly Superannuation Performance report lists the total size of Australia’s superannuation system at $4.5 trillion, a figure that represents around 150 per cent of GDP.
Today, that places us squarely among the world’s largest pension systems.
By 2035, Australia’s superannuation system is expected to overtake the UK and Canada to become the world’s second largest national pension fund.
Regardless of changes to the size of the system, there is one underpinning principle that always endures: the need for super funds to make decisions in the best financial interest of their members.
What has changed is how that obligation must be delivered – and that looks very different today than it did 10 years ago.
What has changed and why it matters now
Some of the major changes in the operation of the superannuation industry are a function of the growing size of the funds they manage:
- The burgeoning need to invest globally: as the fastest growing private pool of capital in Australia, it has become necessary to diversify investments. 48 per cent of superfunds’ assets are now invested offshore, and there are predictions that 75 cents of every new dollar will need to be invested overseas to access opportunities at scale.
- Variation in offshoring strategies: some funds are managing directly, some via smart partnering and others are completely outsourcing via managers on the ground.
- Heightened regulatory expectations: we see increased focused on governance practices, board composition and member outcomes. Due to expected growth in the frequency and extent of market volatility, there is also a need to stress test liquidity and resilience in portfolios.
- The increased need for cybersecurity resilience: as the system grows, it becomes an increasingly attractive target for bad actors.
- Australia’s ageing demographics: the cohort of Australians who rely on superannuation for daily expenses is larger than ever and growing. PayDay Super regulations further reinforce this shift, by requiring super contributions to be paid and received far more frequently and within tighter timeframes. This raises expectations that retirement savings are not only invested for the long-term, but are also accessible quickly, reliably and predictably when members need them.
Liquidity at scale – a strategic and governance issue
At today’s size, liquidity is no longer a technical portfolio management concern. It’s a strategic, governance and risk issue that sits squarely with the board.
To act in the best financial interests of members, superannuation funds must ensure members can access their money when they need it. This includes rollovers, payment of benefits, switches between funds and during times of market stress.
As portfolios become increasingly global, liquidity shifts from an investment consideration to a governance question.
The liquidity of a funds’ portfolio can be affected by time zones, currency conversion constraints, variations in market structures and settlement regimes, and reliance on external managers and partners. In periods of market stress and shock, these factors can mean funds need to sell assets at lower prices, suspend rebalancing or pass costs on unevenly between cohorts of members.
With liquidity now a core governance responsibility, funds increasingly rely on banking partners with the infrastructure, insight and balance sheet capacity to support liquidity across markets, currencies and stress environments.
FX hedging and margining – what has to work when markets move
FX hedging and margining are where liquidity risks become real.
In globally diversified portfolios, currency movements can generate immediate cash demands through margin calls, often during periods of market stress. Ensuring funds can meet these obligations without forced asset sales has elevated liquidity from one of portfolio management to core governance responsibilities.
The heightened sensitivity to stress testing and resilience is especially apparent in super funds’ hedging strategies. The funds now need to grapple, at scale, with the impact of hedging on bank counterparty lines, availability for uncollateralised trades and an ever-increasing focus on the role and opportunity cost of collateral.
FX hedging and margining are also where banking infrastructure and insight matter most. Industry research, including NAB’s long-running Superannuation Insights Survey, shows funds are actively adapting hedging structures in response to liquidity stress, underscoring the value of deep market insight and execution capability in supporting resilient outcomes.
Failure to ensure appropriate levels of liquidity can have system-wide consequences – potentially amplifying the volatility of markets and the broader economy. Ensuring liquidity resilience at this scale is now a matter of national economic importance, which means liquidity oversight must be elevated to the highest level of governance.
Operational resilience – and the role of banking partners
APRA’s CPS 230 regulations reinforce the importance of operational resilience from short-term disruptions to endurance through severe, but plausible, stress. It emphasises that resilience is not about avoiding disruption, but ensuring critical operations can continue through it.
Importantly, explicit accountability is placed on boards to ensure the critical functions continue to operate over time. CPS 230 regulations essentially ask boards to answer: ‘can the system keep functioning when assumptions fail?’
Banks play a key role in supporting super funds’ CPS 230 payment obligations through leadership in governance, transparency in due diligence and providing risk assurance as a material service provider.
What this means for the next phase of offshore investing, governance and resilience
As superannuation capital becomes increasingly global and systemically important, the resilience of its supporting banking infrastructure is inseparable from the resilience of the broader economy.
Investment in offshore assets is now measured, thoughtful, partnership-led, performance-focussed and increasingly diversified to adapt to a global investing landscape.
Banks need to deliver resilient liquidity infrastructure that function under stress, enable diversification through global market access, support long-duration investing with durable funding and refinancing capability, and contribute insight that strengthens governance across the system.
In this context, long‑term banking partnerships are no longer merely transactional. Balance sheet capacity, durable funding and execution capability have become central to operational resilience and member outcomes.
By Sarah Elliott, executive fund sponsors, strategic investors and alternative assets, NAB