One aspect of the superannuation system is certain: growth. Businesses in domestic industries like manufacturing and retail are losing customers. Not superannuation. Fund members can choose which company manages their retirement savings but they cannot leave the system. They pay money into funds as long as they stay employed.

Unlike other financial institutions, super funds don’t usually shed employees during economic downturns. Some positions may become redundant during mergers. But most funds are growing and steadily hiring more staff as they develop new member services and, in the process, become more complex businesses.

But growth – even if it is guaranteed – does not eliminate the competitive pressures of business. This month’s cover story shows that some super funds do not rely on their legislated revenue streams to exist. Some industry funds, like the $43 billion AustralianSuper, merge to gain economies of scale and provide more investment services, financial planning and education to members. Retail fund AMP’s merger with AXA Australia and New Zealand also strengthened it’s business. AMP now manages $68 billion in superannuation assets and has 3427 financial planners. Such funds can use greater scale as a means to improve services and engender further growth. In a fragmented market where AMP – Australia’s largest superannuation provider – has market share of about 4 per cent, there are plenty of opportunities for such funds to keep executing their growth strategies.

Some smaller funds, meanwhile, don’t aim to dramatically increase scale. They focus exclusively on members who work in a particular industry or geographic range and provide services that they believe closely match their interests. Whether such funds can continue to do this after a superannuation reform process asking them to justify all aspects of their business – investment strategy, governance, operations and, crucially, costs – remains to be seen. In coming years they will repeatedly face the question: what size should a small fund be to satisfy regulators that it has enough scale to be competitive?

Both strategies rightly view growth for the sake of growth as meaningless. Funds pursuing greater scale should do so because it can be harnessed to improve investment returns and member services. Those that don’t should regard growth through mergers as a distraction from satisfying their chosen segment of the superannuation market.

These are responses by funds to scale arguments and member choice. They must continue to evolve: not even the luxury of mandatory customers makes funds invulnerable to smart moves by competitors.

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