The data was taken from publicly available information on websites and in annual reports. “I think that says that there are scale economies in super, and they’re not a death sentence for smaller funds, but they do mean that the smaller funds need to deliver value, and that might be because they’re closer to the members [or] it’s a more personalised service,” says Wayne Walker, partner at Deloitte Actuaries & Consultants. “You can’t ignore the realities that there are some savings that come with size.”
Silk says AustralianSuper, which was created in July 2006 on the back of a merger between Australian Retirement Fund and Superannuation Trust of Australia is still in the process of harvesting all the benefits, but points to increased services, a significantly enhanced insurance offering and an expanded in-house investment team as some of the benefits realised so far. “It’s enabled us to spread our marketing costs across a wider membership base than we had previously,” he adds. “We had three high level objectives; increasing services, [putting] downward pressure on fees and costs, [and] enhancing the promotion of our brand, and all of those we’ve been able to do.” Rooney says Media Super has also realised significant cost savings for members on things like auditing and regulatory fees, because APRA levies are based on funds under management but capped at a certain level.
“There are a lot of cost savings for the members both directly and indirectly,” he says. “A lot of the costs Senator Sherry is talking about are direct costs, but there are also a lot of indirect costs, for example we’re expecting a significant reduction in our insurance premiums. Over time the costs of investment management fees will reduce as well because you have greater purchasing power if you’re offering a lot of money when you’re looking at investment managers.” However mergers are not for everyone.
Silk says it’s up to each trustee to look at their own fund and ask themselves whether they’re providing the maximum value available to their members. And Bresnahan says there’ll be cases where merging just doesn’t make sense. “There are certainly synergies there between the right funds,” he says. “I think there’s a risk that some funds will merge for mergers’ sake and that the demographic and styles of the two funds won’t necessarily yield much by way of reduced costs, but there are other examples where there are glaringly obvious merger opportunities that need to be taken and probably haven’t been taken for a series of reasons.”