Mercer says retirement readiness will define super survivors

Australia's superannuation system is entering a more competitive phase, according to Mercer, which forecasts that the number of APRA-regulated funds will fall from 75 today to around 33 by 2035. In its Shaping Super 2026 report, the consultancy said consolidation is expected to continue, with the fund count set to halve over the next decade as the gap between mega funds and the rest widens. Mercer noted that consolidation is already running faster than its prior projection, which had anticipated a decline from 89 to 78 funds; the current count now stands at 75. Half of all mergers projected over the next 25 years are likely to occur within the next five years.

Mercer identified the retirement phase as the fastest-developing part of the system and increasingly central to long-term competitiveness. It said 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." Yet more than two-thirds of remaining funds still do not offer a non-basic account-based pension retirement product.

The system is still growing, with assets reaching $4.3 trillion as at 30 June 2025 and projected to reach $15.1 trillion by 2050, or about 169 per cent of GDP. Mercer expects benefit payments to overtake contributions around 2037, creating a net negative cash flow position even as asset growth continues through investment returns. The firm said this would require funds to strengthen cash flow and liquidity management. The average fund is expected to quadruple to $161 billion by 2035, though much of that growth is expected to be investment-driven rather than the result of stronger net inflows.

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, though Mercer argued scale alone will not be enough. The report also said the traditional retail-versus-industry distinction is becoming less relevant, with scale, member demographics and retirement capability emerging as more important markers of success. Affluent and accumulator funds are expected to lose ground unless they better define their role.

Mercer also questioned how differentiated many funds are. While 83 per cent of funds still claim strong investment returns or low fees as core parts of their value proposition, only 24 per cent fully achieved what the report describes as an understandable, defensible and differentiated value proposition. Mercer said trustees best placed to thrive in 2026 and beyond would be those able to articulate their purpose, improve member engagement in retirement, and keep pace with a tougher regulatory environment.