Financial Synergy general manager for administration and investments, Robert McKinlay, said trustees in particular are feeling the heat and many are looking at ways they can best serve their fund and their members.
"A lot of trustees are struggling with frozen or illiquid assets and they are struggling with how to handle that with their investments and how to spread equity across members, where funds have pensions and people have pension money and the underlying investments have now frozen," McKinlay said.
"The reporting regime has also increased and there is a lot of activity advising members and keeping them informed."
For this reason McKinlay said many funds are choosing to merge to reduce administration and trustee costs.
Superannuation Minister Nick Sherry's recent announcement that the government will provide temporary tax relief for merging superannuation funds has certainly paved the way for fund mergers to rise.
The Stevedoring Employers Retirement Fund (SERF) and the Seafarers Retirement Fund are set to form Maritime Super, while AustralianSuper and Legal Super are both in talks to merge with smaller industry funds. There are also reports that at least ten super funds are expected merge over the next few months.
The Association of Superannuation Funds of Australia (ASFA) welcomed the decision.
"We have been pushing for months for this and we are thrilled with Senator Sherry's decision as it will enable the mergers to go ahead," ASFA chief executive Pauline Vamos said.
However, director of Trust Company Superannuation Services and superannuation barrister Noel Davis believes merging is not always the answer for super funds looking to cut costs and provide effective services for members.
"The suggestion at the moment is that a whole host of smaller funds should merge due to an economy of scale. It's like the issue of mergers of public companies - the question is do they receive cost savings? And the answer in many cases is they don't," Davis said.
Davis suggests that funds look towards outsourcing their trustee function to specialist trustees, who have systems in place that can meet regulatory obligations and spread the cost over a number of funds.
"I've seen a lot of funds merge - some have been successful and others haven't been happy with the result because they've just disappeared," Davis said.
"It is a case by case issue. There are some mergers I've seen that are very successful because they've merged the boards of the trustee and they've been a good fit, but it doesn't necessarily reduce costs."
Davis said outsourcing trustee services is a way for funds to retain their identity and "not disappear into the big funds".
He said industry funds were currently much more likely to merge than outsource the services of a trustee service, but bigger retail funds such as BT Super Wrap have taken up the option.
"It is an option for the industry funds rather than lose their identity, but it generally hasn't happened there," Davis said.
Financial services company Top Quartile Management, a subsidiary of Financial Synergy, last week awarded Trust Company Superannuation Services a $200 million mandate to act as a trustee for a number of superannuation funds.
Austock Brokers Super Fund, GrowSuper, Model Super Fund, Super Synergy Fund, Synergy Secure, Top Quartile Super Trusts and Wealthcare Super Service are among the super funds to be migrated to Trust Company Superannuation Services.
