Industry funds receive 13.8% increase, while retail sector run by big banks and finance companies grow by just 0.51%

This article is more than 1 year old

This article is more than 1 year old

Not-for-profit superannuation funds have moved into a clear position of dominance in Australia’s $2.87tn retirement savings industry following the banking royal commission, new figures show.

Statistics released by the prudential regulator on Wednesday show the amount of money looked after by industry funds, which are jointly run by employers and unions, surged by $87.3bn, or 13.8%, in the year to the end of June.

Over the same period of time the amount managed by the retail sector, which is run for-profit by big banks and other finance companies, grew by a miserly 0.51%, or just $3.2bn.

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Industry funds have reported receiving a flood of fresh cash following the Hayne royal commission, which exposed widespread misconduct by the banks that included charging fees to dead people, ripping off super customers by paying them sub-par returns and failing to move them to cheaper investment options.

Banks now face compensation bills widely tipped to total more than $2bn and further reputational and financial damage from a series of lawsuits lodged by the corporate regulator.

The not-for-profit sector, long targeted by the government over its links to the union movement, escaped last year’s hearings largely unscathed, although hospitality sector fund Hostplus was criticised for its lavish spending on entertainment for employers that included tickets to AFL games and the Australian Open tennis.

In one major disappointment for the industry sector’s critics, the royal commission decided not to call witnesses from CBus, which is linked to the militant construction union.

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Bernie Dean, the chief executive of Industry Super Australia, said the figures were “a testament to the industry fund model of profit-to-members”.

“The chronic underperformance that is continuing to plague the retail sector should serve as a timely reminder to the government that underperformance is the single most costly drag on the system and must be dealt with,” he said.

The contrast between the two sectors was even starker in the last three months of the year, when industry super’s share surged $41.2bn, or 6%, while the retail operators grew by just $2.3bn, or 0.36%, the Australian Prudential Regulation Authority figures show.

They also reveal that industry funds have pulled clear of their retail rivals to establish a superior share of the market.

As of June last year, the two sectors were neck-and-neck, with industry funds controlling 23.4% of super savings against retail’s 23%.

But with with $718.7bn under management, industry super now accounts for about a quarter of Australia’s $2.87tn in retirement savings, while retail’s $625.7bn means it has gone backwards to 21.8%.