| Asset allocation (funds with more than six members) | ||
|---|---|---|
| Asset class | Amount (A$bn) | Percent |
| Cash | 208 | 9 |
| Australian fixed interest | 265 | 11 |
| International fixed interest | 191 | 8 |
| Australian listed shares | 512 | 22 |
| Listed property | 60 | 3 |
| Unlisted property | 112 | 5 |
| International shares | 632 | 27 |
| Infrastructure | 192 | 8 |
| Hedge funds | 17 | 1 |
| Unlisted equity | 114 | 5 |
| Other | 32 | 1 |
| Total | 2,339 | 100 |
| Source: Association of Superannuation Funds of Australia | ||
The inward investment of Australian, and other countries', pension funds is that it helps cash-strapped local councils. McClymont says: "They can bring capital to the table as well as their operational experience of operating all over the world.
This co-operation is set to get closer as it was announced in November last year that IFM would investanother £10bn in the UK by 2027, assuming the right projects are available. It has already invested £5bn.
The Australian pension funds are not alone in investing in UK infrastructure. On the M6 toll booth, they have gone into partnership with GLIL, which is the investment vehicle of the Greater Manchester Pension Fund and the London Pensions Fund Authority – DB schemes.
Nest, the UK's biggest master trust, also invests in infrastructure, but it is something of an outlier, given its scale at £36bn.
Insurance drawback
All this innovation and development has allowed Australian Superannuation funds to deliver roughly about 10 per cent a year capital growth (9.9 per cent 2023, -4.6 per cent 2022, 13.4 per cent 2021) compared with master trusts in the UK varying between -1 per cent and 6 per cent.
However, there is a drawback with the Australian Superfund system, which is insurance.
Superfund trustees are required by law to give life assurance to their members once they are over 25, and other insurance products, some of which are optional, such as income protection.
A deduction is taken from the pension fund to pay for it, but according to Kirwan, it is a less efficient model than in the UK, where the employer often takes responsibility for it.
He says, in the UK: "The employer is paying the contribution, and the employer knows when you're off sick, they are also incentivised to get you back to work as it saves them money.
"In Australia it's the opposite incentive. The employer is not paying the contributions, so they don't care, the contributions are paid by the super trustee, but they don't know whether you're off sick.
"You also have a really long time between when someone goes off sick and when the claim comes in."
Ultimately, insurance notwithstanding, the Australian system means that pension funds have grown to such an extent that many people look forward to an adequate retirement fund, giving civil servants in the UK reason to look at it very closely.
Melanie Tringham is features editor at FT Adviser
