Rainmaker analysed 13 mergers between 22 super funds managing a collective $410 billion. Of the 13 mergers, 11 were “traditional” – not integrations – and led to the more expensive funds’ fees being lowered by an average of 21 per cent.
A majority of the funds with lower fees also saw average fee reductions of 5 per cent.
“Mergers have created efficiencies and economies of scale for the funds, which has led to members being better off,” said Rainmaker executive director of research Alex Dunnin.
“Regulators and political leaders continue to heap pressure on funds to merge, particularly if they lack scale or consistently under perform.”
Rainmaker also found that fees actually went up on average across the funds that integrated – primarily the combining of Virgin Super and Mercer Super Trust, and the integration of trustees offices of Catholic Super and Equipsuper.
“Fees don’t go down just because a super fund merges, they go down because the trustees redesign the product,” Mr Dunnin said.
“Products are more likely to be redesigned in a merger but not when funds just combine their back offices.”
Merger activity has intensified in the wake of the Productivity Commission, with seven mergers occurring in the 18 months since the findings were released compared to six in the two years prior. The acquisition of MLC by IOOF has the potential to be the biggest merger in superannuation history if it leads to the consolidation of their APRA-regulated superannuation funds. The wealth giant’s chief executive, Renato Mota, said that he was anticipating significant consolidation in the superannuation landscape.
“The expectation is Australia’s largest super fund in five years is likely to have about half a trillion dollars. And I think there’ll be a handful of others with $2 billion to $300 billion,” Mr Mota said.
“And in many ways it’ll be those funds that will set the scene for the value equation for clients and challenging the rest of the industry to deliver better client outcomes.”
