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Australian pension funds will make more than $1tn of new investments in overseas markets over the next decade, as the country’s retirement savings industry becomes a rising force in international finance.

The country’s superannuation funds hold $812bn — or 37 per cent of total assets — in international markets and this will rise to $2.6tn by 2035, according to the trade body Super Members Council of Australia.

SMC Australia, which represents more than 12mn retirement savers, expects about 60 per cent of the $1.8tn in additional foreign holdings to be new money, and the rest to come from the performance of existing investments.

Appetite for foreign assets is being supercharged as workers in the 27mn person country pay more into their pensions, partly due to the government boosting automatic pension contribution requirements, while investment opportunities at home fail to keep pace. 

As of July, Australian companies must pay at least 12 per cent of employees’ salaries into pensions, from 9.5 per cent in 2021. This compares with a minimum 8 per cent for employees and companies combined under UK auto-enrolment rules.

“Australia has the fastest growing super system globally — twice the rate of international peers,” SMC chief executive officer Misha Schubert told the Financial Times. She added that Australia was the only OECD country in which government-funded pensions payments were expected to be lower as a proportion of GDP in 2060 than today.

SMC expects Australia’s super system to rise from under $3tn today to $7.2tn by 2035 and overtake Canada and the UK to become the largest outside the US. AustralianSuper, the country’s largest pension fund with $250bn of assets, expects to almost treble in size by 2035.

Growth in Australia’s overseas superannuation holdings, about half of which are invested in the US, has increased the clout of the funds, which are being courted by foreign governments. The UK and the EU account for the majority of the other half deployed abroad.

An Australia superannuation investment summit in the US earlier this year was attended by Treasury secretary Scott Bessent and commerce secretary Howard Lutnick. Jim Chalmers, Australia’s Treasurer, used the event to highlight how his country’s investors could help channel investment to infrastructure and data centres in the US.

“You can judge by what access you get . . . the top US government officials were there,” said the investment chief at one of the big superannuation funds, adding that they were given “really good insight on what the government was planning to do around tariffs”.

The UK has long pursued Australia’s super funds, the largest of which have offices in London. The funds are also reversing their cautious approach to investing overseas as they are keen to reduce their outsized role in Australia’s markets, which can no longer fully absorb their money.

The UK is looking into hosting an Australian superannuation summit next month to explore co-investment opportunities between the biggest UK and Australian pension funds, according to multiple people familiar with the plans. 

The nations’ pension funds have forged closer ties, with the UK state-backed pension National Employment Savings Trust in February saying it would buy a 10 per cent stake in the holding company of IFM Investors.

Nest joined 16 Australian pension funds as an owner of IFM, the world’s fourth largest infrastructure investor, and pledged to invest £5bn with the firm by 2030 in one of the biggest-ever private market commitments from a UK pension fund.

AustralianSuper earlier this year said it planned to allocate about 70 per cent of its inflows to international markets, with more than half of going to the US.

It also plans to increase exposure to private equity from 5 per cent to 8 per cent over the next five years, mostly from its New York office. 

Aware Super, which manages A$200bn ($132bn) and opened its first overseas office in London in November 2023, in June said it was ahead of schedule on plans to invest A$10bn in the UK and Europe over five years.

“The growth of the Australian superannuation system has been remarkable,” said Damien Webb, deputy chief investment officer at Aware Super. “We absolutely need to be globalising”.