In May, TelstraSuper announced its intention to explore merger options as part of its long-term strategy.
At the time, the corporate fund said it was “currently in a strong and healthy position” with positive net member growth, high member advocacy, and a growing retirement segment.
In a recent update, TelstraSuper said the merger process will contain three key phases, with the first being a review and shortlisting of potential merger partners.
“The board has now commenced phase one of the merger process and there has been a high level of interest from funds seeking to partner with us,” it wrote.
According to the $25 billion fund, its board is currently considering information provided from a range of potential merger partners to “enable us to find the right fit”.
Adding that its members’ best financial interests are “front and centre” of the process, TelstraSuper clarified that phase two and three will include choosing a preferred merger partner, commencing further due diligence, and making a formal agreement.
“We anticipate that this will occur before the end of 2025.”
Originally established in 1994 exclusively for employees of Telstra, the fund noted in May that less than one-quarter of its members work for the Telstra group of companies after it opened membership to all in 2022.
“Many new members come directly to the fund or through other unrelated employers and not through Telstra’s employment,” it said.
“The TelstraSuper board and Telstra Group came to the view that the time has come for TelstraSuper to move forward with a new separate identity from the Telstra Group.”
Moreover, the fund’s current custodial contract is due to expire in 2025, it said, and it will need to move to a new arrangement by that time.
“Changing custodian is a significant task for the fund, and, again, a merger will facilitate the timely replacement of our current custodial arrangements,” it said.
The update comes shortly after another corporate fund, Qantas Super, announced last month it has entered into an agreement to merge with Australian Retirement Trust (ART).
When completed, the merger will see over 26,000 Qantas Super members join the $300 billion fund.
Much of this merger activity among corporate funds, according to research house SuperRatings, comes amid shifting tides in the highly competitive superannuation industry.
“Historically, larger employers have seen corporate plans as a way to tailor and enhance their value proposition to employees. By having a large enough group of relatively homogenous members, insurance rates in particular could be customised to fit specific demographics while still benefiting from group insurance arrangements,” SuperRatings’ insights manager, Joshua Lowen, told InvestorDaily in May.
“Often, fees would be lower than in ‘standard’ superannuation offerings although this is less true now as competition and high levels of fee scrutiny from the regulator have compressed fees across the market. Corporate sponsors also would subsidise fees or insurance premiums for employees.”
However, amid increased competition and regulatory reform, corporate funds are struggling to meet the size and scale necessary to keep their doors open.
“Combined with the reducing fee benefits as standard fee rates decline, they are losing their points of difference with large, easily accessible open funds,” Lowen said, adding that operating a corporate fund often comes with a cost to the employer.
“Benefits are reducing and costs are increasing, it has made greater sense for these funds to merge.”
