Australia’s superannuation sector closed the financial year on a high, with a wave of strong, often double-digit, returns delighting members and demonstrating the resilience of diversified investment strategies. However, this positive performance was set against a backdrop of intensifying regulatory pressure. The corporate regulator, ASIC, fired a clear warning shot on pushy switching tactics and confirmed it is investigating the role of super trustees in major product failures. This dual narrative of impressive gains and heightened accountability, combined with a rapid acceleration in technology adoption, defines a sector in a state of significant transformation.
Strong Returns Delivered Amid Market Volatility
Superannuation funds have delivered a third consecutive year of strong returns, defying market volatility and a complex investment backdrop. A host of major funds announced double-digit returns for their default options for the financial year ending 30 June 2025. Aware Super led the pack with a 12.7% return for its flagship growth option, while HESTA members saw a 10.18% return in the Balanced Growth option.
Other industry giants followed suit, with REST posting a return above its 10-year average, and Cbus also delivering strong annual returns. Retail funds also performed well, with Colonial First State (CFS) and Vanguard reporting robust results, primarily driven by thriving domestic and global equity markets. AustralianSuper, the nation’s largest fund, delivered a solid 9.5% for its MySuper option.
Despite the strong year, fund executives remain cautious. HESTA flagged a more conservative outlook for the year ahead, a sentiment echoed by market experts who warn that tougher times may be ahead as the rally faces headwinds. Funds are actively positioning their portfolios, with Brighter Super eyeing property and infrastructure to weather market storms, while AMP is closely watching emerging themes like Bitcoin and AI for future growth. The long-running debate over private asset oversight also continues, with super funds and asset managers at odds over the level of transparency required.
Regulatory Scrutiny on Costs and Conduct Intensifies
While members celebrated investment gains, regulators sharpened their focus on industry conduct and costs. ASIC released its estimated industry funding levies for 2024-25, revealing the cost for the superannuation and investment sector is set to rise by over $5 million.
The regulator also issued a direct consumer alert, warning the public about pushy sales tactics urging quick superannuation switches. The warning highlighted unsolicited calls and high-pressure strategies designed to rush members into decisions that may not be in their best interests. The SMSF Association was quick to back ASIC’s alert, reinforcing the message to consumers to be cautious.
In its most significant move, ASIC confirmed it is investigating the role of superannuation trustees in the collapses of the Shield Master Fund and First Guardian investment schemes. This probe into the due diligence and oversight provided by trustees marks a major escalation in regulatory accountability. It could have profound implications for fund governance and the responsibilities of directors when products are made available on investment menus.
On the SMSF front, professionals have been warned that an upgrade to a key tax ruling on valuing assets for limited recourse borrowing arrangements (LRBAs) could mean more red tape.
Technology Transformation Accelerates
The superannuation sector is rapidly accelerating its technology adoption to enhance efficiency, meet regulatory demands, and improve member engagement. The upcoming implementation of payday super is a key catalyst, with AustralianSuper preparing its technology stack for the transition by appointing MUFG and Wrkr to manage the project.
Broader technological shifts are also underway. CareSuper has kicked off a major cloud transition project with Macquarie to modernise its infrastructure. In a significant global move, MUFG announced a five-year alliance with Microsoft to commit to AI in superannuation, signalling that artificial intelligence is set to become a core component of fund operations. The benefits of technology are already being realised, with AMP crediting its digital offering for a 13-fold increase in member engagement. This focus on technology is also driving strategic partnerships, with Insignia Financial finalising a landmark deal that will see it retain key relationships while transitioning around 1300 staff to technology provider SS&C.
Context, Looking Ahead & Takeaways
This week’s strong returns provide a positive headline but mask the deeper structural shifts detailed in previous updates. The regulatory crackdown is not new, but ASIC’s direct investigation into the role of trustees in major product failures is a significant escalation from prior warnings on governance and expenditure. It moves the focus from fund operations to the fiduciary responsibility of the board itself. Meanwhile, the concrete awarding of payday super mandates makes the long-discussed technological uplift a present-day reality.
Looking forward, the ASIC investigation into trustee conduct will be a defining issue for industry governance standards over the next 12 months. As funds begin to implement payday super systems, operational and technological readiness will be critical. While investment returns have been strong, the cautious outlook from fund leaders suggests a more challenging year ahead, placing further pressure on investment teams to find new sources of growth.
Key Takeaways:
- For Superannuation Trustees (Short-term, 0-3 months): Immediately review and document due diligence and oversight processes for all products on investment platforms. The ASIC investigation into the Shield and First Guardian failures has set a new precedent for board-level accountability.
- For Investment Teams (Short-term, 0-3 months): Manage member expectations by clearly communicating the cautious forward outlook despite the strong FY25 returns. This proactive communication can help mitigate member anxiety during periods of market volatility.
- For Operations & Technology Teams (Medium-term, 3-12 months): Accelerate the development and integration of technology for payday super implementation. With funds like AustralianSuper now awarding mandates, the transition is well underway and requires robust systems to ensure a smooth rollout.
- For All Funds (Medium-term, 3-12 months): Prepare for higher operational costs by budgeting for the increased ASIC industry levy. This requires a focus on finding internal efficiencies to absorb the rising cost of regulation.