Mercer says retirement readiness will define super survivors

Mercer forecasts that the number of APRA-regulated superannuation funds will fall from 75 today to around 33 by 2035, according to its Shaping Super 2026 report. The consultancy said consolidation is already running faster than expected: it had projected last year that the fund count would fall from 89 to 78, but the current count now stands at 75. Mercer expects roughly 45 funds by 2030 and a median long-term estimate of about 18 by 2050, with half of all mergers projected over the next 25 years likely to occur within the next five years.

Mercer argues that retirement capability will be a key determinant of survival. The retirement phase is the fastest-developing part of the system, yet more than two-thirds of remaining funds still do not offer a non-basic account-based pension product. Funds actively investing in retirement offerings are expected to have "more than double" the chance of surviving to 2035, while those unable to demonstrate a clear value proposition "risk losing members and relevance," the report said.

Scale remains a significant advantage. Funds with more than $10 billion in assets are roughly twice as likely to survive as those below that threshold. Mega funds currently hold around 39 per cent of market share and are projected to reach 54 per cent by 2035, while affluent and accumulator funds risk losing ground unless they better define their role. Mercer also said the traditional retail-versus-industry distinction is becoming less relevant, with scale, member demographics and retirement capability emerging as more important markers.

Differentiation is another concern. Mercer found that 83 per cent of funds still cite strong investment returns or low fees as core parts of their value proposition, yet only 24 per cent fully achieve an understandable, defensible and differentiated value proposition.

The system's size is forecast to grow, with assets of $4.3 trillion as at 30 June 2025 projected to reach $15.1 trillion by 2050, about 169 per cent of GDP. However, Mercer expects benefit payments to overtake contributions around 2037, creating a net negative cash flow position. The average fund is expected to quadruple to $161 billion under management by 2035, though much of that growth is expected to come from investment returns rather than net inflows. Mercer said trustees must strengthen cash flow and liquidity management, improve member engagement in retirement, and keep pace with a tougher regulatory backdrop.