Australia's corporate regulator has issued a clear warning to the nation's pension fund industry that it must accelerate investment in its systems and technological capabilities to be ready for future pressures. The industry, commonly referred to as superannuation, is currently valued at A$4.5 trillion, equivalent to $3.16 trillion, and is expected to grow to approximately A$6 trillion by 2030.
ASIC Commissioner Simone Constant delivered the remarks in a speech to the Conexus Forum, noting that at the projected size the sector would exceed the banking system and become an even more pivotal element of Australia's financial architecture. She said that while the industry's scale is increasing, a number of funds are lagging when it comes to governance, operational capacity and the technical skills needed to support an expanding retiree population.
"Look at the ASX for a cautionary tale on what happens when your investment and aspiration doesnt match your role in the system," Constant said. "The ASX is one of the most critical limbs of Australias financial services, but it has failed to deliver on its promise to its customers because it has looked backward, not forward, whilst seeing its issues separately rather than listening to customers and bringing them together, for best practice."
Constants comments referenced recent regulatory action against the Australian Securities Exchange, where concerns about the exchanges resilience and ability to operate secure market infrastructure have been highlighted. In December, ASIC imposed an additional capital charge of A$150 million on the ASX following an inquiry that began in June. The inquiry was launched after a failed software upgrade and multiple trade-processing glitches over a period of years.
The regulator has raised questions about the ASXs capacity to provide secure and resilient critical market infrastructure. The ASX declined to comment.
Beyond market infrastructure, the pension sector faces its own operational pressures as Australia prepares for a substantial wave of retirements. Previous notices to the industry have emphasized the need to accelerate preparations for an estimated 2.5 million people expected to retire in the coming decade. Commissioner Constant said some funds need to step up investment in governance, operations and skill sets to manage increased drawdowns and service requirements from retirees.
As the superannuation sector expands in scale and significance, the regulators message was that funds should not treat their systems and customer needs as separate issues. Instead, Constant urged the industry to align its investment and operational planning with its evolving role in the broader financial system.
Context and figures:
- Current estimated size of the superannuation industry: A$4.5 trillion ($3.16 trillion).
- Projected size by 2030: A$6 trillion, at which point it would surpass the banking system in Australia.
- Regulatory action: ASIC imposed an extra capital charge of A$150 million on the ASX in December after an inquiry launched in June into system failures.
- Retirement pressure: An estimated 2.5 million people are expected to retire in the next decade.
- Currency reference: $1 = 1.4255 Australian dollars.