Superannuation fund mergers do not always lead to more efficient organisations and the process of bringing two bodies together is riddled with pitfalls, fund executives have said.
"The larger funds in the country don't necessarily have lower MERs (management expense ratios) than smaller funds and, in fact, some of the medium-sized funds have lower MERs than the very large funds," legalsuper chief executive Andrew Proebstl said at this week's annual Australian Super Investment Conference on the Gold Coast.
Proebstl said that according to a sample of nine funds, the average MER of funds with more than $5 billion in funds under management (FUM) was 1.22 per cent in the 2009 financial year, compared to 1.15 per cent for funds with between $2 billion and $4 billion in FUM.
Since 1996, the number of superannuation funds has fallen from more than 4700 to 429 this year.
But further consolidation is widely expected, and former Cooper review chair Jeremy Cooper has in the past stated the number of funds should fall to less than 100 to optimise benefits of scale and drive down costs.
But mergers are not an easy process.
Media Super trustee director and chair Gerard Noonan said mergers often caused problems in the management of the merged entities.
"You end up having two CEOs and you have to make the decision to have one CEO," Noonan said.
These types of decisions could lead to resentment among senior executives and this can bring the merger process to a halt.
"Mergers are easily derailed. It only takes one determined individual," Noonan said.
Firstsuper chief executive Graeme Russell said the costs of a merger could also spiral out of control and needed to be closely monitored.
"One thing to really look out for is the stamp duty on transfer," Russell said.
"We ended up spending $170,000 and it took us six months to negotiate relatively small bills.
"It took some convincing to make state governments understand that the assets were still held by the same owners [post-merger].
"Merger day is only the halfway mark. It took us 12 to 18 months to finalise everything."
