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‘Arbitrary thresholds’ shouldn’t guide super mergers

Superannuation funds shouldn’t merge based solely on their funds management or number of members, says the Association of Superannuation Funds of Australia.


Following the Productivity Commission’s release of the Superannuation: Alternative Default Models draft report last week, advisory firm Rice Warner reiterated its belief that smaller, less efficient super funds should be merged.

“The complexities of our industry – life insurance, financial advice and retirement strategies – means that funds deliver far more than they did a decade ago. The reality is that larger funds are better able to invest in and ultimately deliver these services,” Rice Warner said.

Association of Superannuation Funds of Australia (ASFA) chief executive Martin Fahy, however, said there was no reason for smaller funds – defined by Rice Warner as those with less than $2 billion in funds under management or fewer than 100,000 members  to merge based on their size.

“ASFA does not believe there should be any set, arbitrary threshold in terms of assets under management or number of members under which funds should necessarily merge,” Mr Fahy said.

“Merger decisions by funds, both large and small, should be taken in the light of all of the circumstances of the funds and members involved.”

Mr Fahy said smaller funds were still able to access the benefits of scale through the use of external service providers, and were able to serve groups with particular needs or interests “including ethical and/or sustainable investments”.

“In addition, forcing funds to merge that are mostly operating in the choice space, where the members explicitly chose to be a member of the fund, does not serve any useful purpose,” he said.

“Members of such funds sign up on the basis of what is being offered, with fees being just one part of the product offering that they consider. The range of fees does not differ markedly between MySuper products regardless of their scale.”

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