Australia's pension assets touched almost AU$4 trillion, thanks to a growth fueled by record investment by workers and a high rate of return, the Australian Prudential Regulation Authority revealed on Tuesday.

As a result of the massive inflow and 10.9% rate of return, the industry's assets rose 11% annually to AU$3.85 trillion, Bloomberg reported.

Total contributions have surged by 11.3% to AU$177 billion in the year ending in March 2024. As employer contributions increased by 12.4% over the year to AU$133.3 billion, contributions by members surged by 8.2% to AU$43.7 billion.

The two biggest market players, AustralianSuper and Australian Retirement Trust, manage a combined asset of AU$35 billion.

Australian employees contribute the equivalent of 11% from their wages to the pension schemes. The contribution will soon be raised to 11.5% before capping it at 12% by July this year.

The seven pension funds, known as superannuation, manage more than AU$100 billion each. But, the industry comes under stringent monitoring and annual evaluation of its performance, intended to consolidate funds, while reducing fees and increasing returns for the members.

However, the biggest challenge for the pension funds is the high volume of retirement expected in the next five years. According to government data, more than 700,000 Australians are preparing to retire in the next five years, with 226,000 retiring in the next two years.

As the pension funds continue to grow, investments are now expanding beyond the country leading to a huge chunk of assets being located overseas.