A number of industry and corporate superannuation funds are considering consolidating their whole range of fund options into one MySuper product, adopting a single fund model.
These funds have the vast majority of their members in a default option and are reviewing the economies of scale to establish choice options for the small number of members outside the default option.
"Some clients may convert their whole fund into a MySuper product," Mercer managing director and market leader for Australia and New Zealand David Anderson said.
"There are opportunities for a category play, [if they] believe that they've got all of the MySuper requirements in place right now.
"They might say: 'Clearly 90 per cent of the members will move into the MySuper version with the same asset allocation and the same investment style.'"
The model does not only make sense for funds, but members might also have to consider switching back to a default option as the choice fund will not be able to deliver them scale and cross-subsidy benefits.
"The reality is that for the choice members over a long period of time the costs are going to be proportionally higher," Anderson said.
He said it was unclear yet whether funds would indeed go down this path, but a number of clients from both the industry and corporate super fund sectors were currently looking into the MySuper-only model.
"I've spoken to clients from each camp that have suggested that," he said.
These fund will have to ask members who are not in the default options to transfer to the MySuper structure.
"It just depends on the [fund]. Where they have money spread across different asset allocations and different investment styles, it will be much harder to compulsorily move people into MySuper," Anderson said.
Funds that transferred to a MySuper-only offering would still be able to be competitive through their affinity with their membership and make-up of their investment portfolios, or additional services, including life insurance options and, in the case of industry funds, modern award distribution models, he said.
