Fees drop after super mergers

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Fees drop after superannuation fund mergers

Superannuation mergers have led to a 20% decrease in fees for fund members, according to research from Rainmaker Information.

This result is based on a detailed study of 13 mergers that occurred over the past three years involving 22 super funds that represent $410 billion in member's money, highlighted in Rainmaker's Super Benchmarking Report.

Mergers have become more common since the findings of the Productivity Commission were publicly released in January 2019.

Of the 13 mergers, 11 were traditional mergers, while two were integrations of  super funds, being the combining of Virgin Super and Mercer Super Trust and the integration of the trustee offices of Catholic Super and Equipsuper.

In all 11 of the traditional mergers the more expensive fund's fees lowered, with an average decrease of 21%.

Superannuation fees lower after mergers - Rainmaker Information

For the fund with lower fees in the traditional mergers, seven of the 11 saw their fees drop, a reduction of 5% on average.

"Mergers have created efficiencies and economies of scale for the funds, which has led to members being better off," said Alex Dunnin, executive director of research at Rainmaker Information.

"Regulators and political leaders continue to heap pressure on funds to merge, particularly if they lack scale or consistently under perform."

Nine of the 11 funds saw their fees drop or stay the same when comparing the average pre-merger fees against the post-merger fees.

Of these results the average fall was 14%.

However, of the two fund integrations, fees actually went up on average across the funds.

Dunnin said, "fees don't go down just because a super fund merges, they go down because the trustees redesign the product."

"Products are more likely to be redesigned in a merger but not when funds just combine their back offices."

Seven mergers occurred in the 18 months since the findings of the Productivity Commission were announced, compared to six in the two years prior.

Further to this, several other large-scale mergers have been announced since Rainmaker conducted this research, including:

  • NGS Super and Australian Catholic Super
  • CBUS and Media Super
  • The acquisition of MLC by IOOF, which could overtake the merger of First State Super, VicSuper and WA Super (to form Aware Super) as the biggest merger in Australia's superannuation history if it was to lead to the consolidation of their APRA-regulated superannuation funds.

On top of this, more details have been announced regarding the merger between MTAA Super and TasPlan.

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