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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\u2019s retirement savings industry becomes a rising force in international finance.<\/p>\n
The country\u2019s superannuation funds hold $812bn \u2014 or 37 per cent of total assets \u2014 in international markets and this will rise to $2.6tn by 2035, according to the trade body Super Members Council of Australia. <\/p>\n
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. <\/p>\n
Appetite for foreign assets is being supercharged as workers in the 27mn person country pay more into their pensions<\/a>, partly due to the government boosting automatic pension contribution requirements, while investment opportunities at home fail to keep pace.\u00a0<\/p>\n As of July, Australian companies must pay at least 12 per cent of employees\u2019 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. <\/p>\n \u201cAustralia<\/a> has the fastest growing super system globally \u2014 twice the rate of international peers,\u201d 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.<\/p>\n SMC expects Australia\u2019s 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\u2019s largest pension fund with $250bn of assets, expects to almost treble in size by 2035.<\/p>\n Growth in Australia\u2019s 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.<\/p>\n 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\u2019s Treasurer, used the event to highlight how his country\u2019s investors could help channel investment to infrastructure and data centres in the US. <\/p>\n \u201cYou can judge by what access you get\u2009.\u2009.\u2009.\u2009the top US government officials were there,\u201d said the investment chief at one of the big superannuation funds, adding that they were given \u201creally good insight on what the government was planning to do around tariffs\u201d. <\/p>\n The UK has long pursued Australia\u2019s 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\u2019s markets, which can no longer fully absorb their money.<\/p>\n 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.\u00a0 <\/p>\n The nations\u2019 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. <\/p>\n Nest joined 16 Australian pension funds as an owner of IFM, the world\u2019s fourth largest infrastructure investor, and pledged to invest \u00a35bn with the firm by 2030 in one of the biggest-ever private market commitments from a UK pension fund.<\/p>\n AustralianSuper earlier this year said it planned to allocate about 70 per cent of its inflows<\/a> to international markets, with more than half of going to the US. <\/p>\n 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.\u00a0<\/p>\n