Not-for-profit funds were more likely to outsource than retail funds, according to the latest research released by the Australian Prudential Regulation Authority (APRA).
The research, which examined the outsourcing of large APRA-regulated superannuation funds, found this trend continued even more so when one looked through formal outsourcing arrangements with related service providers.
The research also found that for some services, on average, trustees of retail funds pay higher fees to related service providers, particularly for administration, compared to independent service providers.
The estimated annual cost in fees that retail funds paid independent service providers was approximately $6.5 million, while the fees paid to related service providers was around $16.6 million.
Meanwhile, the annual figure not-for-profit funds paid both independent service providers and related service providers was a similar fee of around $6.3 million.
Furthermore, the research found that in highly concentrated markets such as custody, actuarial services and auditing, dominant service providers charge higher fees.
“The findings provide industry and members with a clearer picture of the outsourcing arrangements and fees of trustees of APRA-regulated superannuation funds,” APRA deputy chairman Ross Jones said.
The research examined the outsourcing of eight functions including auditing, administrative services, legal services, asset allocation, sales and marketing, custody, actuarial services and investment management.
The study compared the fee arrangements of independent service providers to those providers related to a fund trustee, and compared fees across different service sectors to determine the extent to which providers in more concentrated markets charged more than providers in more competitive markets.
While 187 superannuation funds participated in the research survey, APRA said analysis was limited to the 115 funds that provided five-year fund-level investment returns.
