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Annuities and Other Retirement Products
scheme. On June 30, 2009, there were 415,000 self-managed superannuation funds, and the number of small funds is growing at approximately 2,500 a month. Other efforts have been made to increase the coverage of superannuation. In 1997, a spouse contribution initiative was launched, enabling schemes to offer members the option to establish a separate member account for their spouse and make additional contributions. Most recently, the government has introduced and enhanced a co-contribution where the government makes a matching payment when members make contributions to their scheme.7 All classes of funds (other than small funds) have been consolidating for some time. (See table 4.5 for types of schemes.) Corporate funds have declined particularly rapidly in both number and share of industry assets (see table 4.6) as costs of administration have increased and the introduction of near-universal employer superannuation has eroded any competitive benefits from offering in-house superannuation. Public sector funds have also experienced large declines. In contrast, industry funds and especially retail and small funds have registered large increases in market shares.8 The consolidation trend was given substantial new impetus by the recent introduction of more stringent prudential regulations, including rules related to fund governance and risk management, and the requirement that the trustees of all APRA-regulated funds be licensed and the funds registered by the middle of 2006. The licensing and registration criteria are rigorous and require trustees to demonstrate that they are fit and proper and have adequate resources and robust risk management systems in place to mitigate the risks of operating a superannuation fund. As a result, the number of funds, excluding small funds and pooled trusts, were reduced to 463 at the end of June 2009, almost one-twelfth of their number 15 years earlier. The number of accounts continued to expand even after the attainment of near-universal coverage in 1995. Superannuation funds reported 33 million accounts in 2009, which is close to an average of 3 accounts per worker. This figure signifies a trend to multiple account holding and may also imply a large number of inactive accounts. Retail funds have more than half of all outstanding accounts, followed by industry funds. The large presence of retail funds raises concerns about the operating efficiency of the second pillar because retail funds are notoriously more expensive than other types of funds, suffer from a much wider dispersion of investment returns and operating fees, and report significantly lower investment returns.9