Australia’s smallest pension funds are being forced into survival mode as increased regulatory scrutiny on fees and investment performance in the country’s A$3.1 trillion ($2.3 trillion) superannuation industry makes mergers all the more likely.
Maritime Super has outsourced its A$6 billion investment portfolio to larger-rival Host-Plus Pty to cut costs and boost returns. First Super inked a deal to draw in retirement savings of New Zealand workers who migrate to Australia, adding to its A$3.6 billion asset base.
Such moves highlight how the small-end of Australia’s vast pension-fund industry is adapting, just as the nation’s regulator encourages them to merge with bigger and better performing rivals. Funds managing less than A$10 billion have more than halved over the past decade as consolidation increased, according to Rainmaker data. Competition is ramping up with so-called megafunds that are expected to rule the sector in coming years.
“We’ve got a job, which is to give our members a dignified retirement,” said First Super chief executive officer Bill Watson. “If we can’t do the right thing by the members, it’s time to pack up and go.”
Maritime Super, one of Australia’s oldest pensions that traces its roots back to 1967, has members going back three generations that have worked as stevedores and deckhands, said chief executive officer Peter Robertson said. His fund is among those identified by the Australian Prudential Regulatory Authority for underperforming.
“To give up that brand and that loyalty of a maritime fund I don’t think would be wise.”
APRA in May said funds with less than A$30 billion are “uncompetitive” -- that’s about 90% of the 142 funds in the regulator’s database. While some 70 funds completed mergers in the past eight years, APRA isn’t convinced many of these were worth it. A proposed merger between Energy Industries Superannuation Scheme and TWU Super -- both underperforming benchmarks -- creates just a A$12 billion fund.
