BDO analysis reveals pay disparities in super sector

The analysis looked at remuneration data for 27 super funds, based on their publicly available annual reports, and found that when it comes to pay, size matters, that is, the larger the fund the higher the directors’ fees and executive remuneration. 

The 2023–24 financial year marked the first time super entities were required to lodge financial reports with ASIC the same way as companies, which included remuneration of all key management personnel (KMP).

“From the 27 super fund reports that we analysed, the majority of funds disclosed their whole executive team as KMP rather than a select few, which meant we have a breadth of roles and responsibilities covered as part of the remuneration reporting, and therefore more transparency around what decision-makers at the nation’s largest superfunds are paid,” BDO partners James Dixon and Matina Moffitt said. 

The average total remuneration – including any cash bonuses, post-employment, and long-term employee benefits – among the KMPs was $570,000 per fund. 

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BDO reported some outliers, noting that two funds had an average KMP total remuneration in excess of $1 million. This was, however, distorted by the size of the total remuneration received by their CEO and CIO. 

Moreover, BDO revealed that from the 27 funds, each super fund had an average of nine directors on their trustee/RSE licensee board, who were paid an average of $107,000.

Regarding CEOs, the analysis said the average remuneration stood just shy of $900,000, although eight funds paid their CEOs over $1 million and four paid more than $1.5 million.

The highest-paid boss received $1.94 million last year.

Meanwhile, the average total remuneration for CIOs stood at $766,000, although the analysis highlighted a “wide breadth of packages”.

Eight funds out of the 27 that were analysed paid their CIO over $1 million, while two funds paid over $1.5 million.

The highest-paid CIO received $1.88 million.

Interestingly, the analysis observed that in six funds, the CIO was actually paid more than the CEO.

This discrepancy is due to the demand for talent, Dixon told Super Review. 

“Given the high demand for talent in the investment management world, if super funds do not offer competitive remuneration, they risk losing their CIOs to the broader asset management sector, which generally offers higher pay and does not have the same restrictions related to members’ best financial interests,” he said. 

BDO’s analysis also observed how incentives factored into remuneration packages, with over half of the funds analysed found to have long-term incentive plans. 

For profit-to-member funds, this constituted deferred cash payments, typically over a four-to-five-year period for CIOs and five-to-six-year period for CEOs. Seven funds – representing a quarter of the survey – had no incentive plans in place.

“All but one of these have net assets available to members of $16 billion or less, and as expected, for-profit/retail funds have long-term incentive plans in the form of share-based payment schemes,” Dixon and Moffitt said.

Looking ahead, BDO forecast a rise in incentive-related remuneration structures, leading up to the implementation of the Financial Accountability Regime (FAR), which will apply to super trustees and insurance entities from March 2025.

“With the implementation of CPS230 Operational Risk Management and FAR just around the corner, we expect to see the continued evolution of remuneration and reward within the superannuation system,” the pair said.

“These regulations aim to promote risk management and accountability and ensure that remuneration does not incentivise excessive risk-taking.

“When the Banking Executive Accountability Regime (BEAR) was introduced in 2018, it significantly impacted remuneration practices across the banking sector, and we anticipate that FAR will have a similar impact across Australian super funds.”