Super mergers creating service provider winners and losers

The winners and losers are beginning to emerge from the Australian Prudential Regulation Authority’s (APRA’s) push to encourage superannuation fund consolidation with administrators, insurers and investment managers all losing lucrative mandates.

When Sunsuper and Qsuper completed their merger to form the Australian Retirement Trust it meant that the merged entity had to make some serious choices about service providers such as administrators, custodians and administrators.

QSuper’s administrator was SuperChoice while Sunsuper was self-administered, QSuper’s custodian was Northern Trust, while Sunsuper retained State Street, similarly QSuper had its own investment management arrangements while Sunsuper used JANA, Askia, Mercer and Stepstone Group.

Similarly, with NSW electricity industry fund EISS Super touted to merge with big building industry fund, Cbus it is likely that Mercer will lose EISS as a client as the Cbus administrator, Link takes over.

However, while losing a client TAL would not lose group coverage of EISS members because Cbus also uses TAL as it its group life insurer.

Where Australian Catholic Super’s merger with UniSuper is concerned its administration arrangements utilising DST Bluedoor face change, along with its insurance cover ins circumstances where it using AIA Australia but UniSuper is using TAL. There would be no change to custodian with both fund utilising BNP Paribas

Deloitte superannuation partner, Russell Mason said there was no question that the consolidation of the superannuation industry was having flow-through effects to service providers, including the major consultancies.

He said that resulting from mergers there were always winners and losers in terms of the service providers who would be retained by the merged entities and those that would lose out.

In most instances, however, it was the larger or the two superannuation entities which tended to dominate the outcome.

According to KPMG, there were 15 mergers or alliances of superannuation fund announced to the market last year, which represented the most activity ever seen in a single year.

APRA has not stated a position on the impact of superannuation industry consolidation on service providers, but has argued that consolidation and rationalisation has been steadily taking place over many years and has continued since the introduction of APRA’s prudential framework in 2013.

In a position paper issued just over a year ago, APRA said that over the past seven years, the asset pool being managed by APRA-regulated funds had more than doubled, from $0.96 trillion in June 2013 to $2.0 trillion in December 2019, whilst the number of APRA-regulated funds has decreased by one-third, from 279 to 185 over the same period.

At that time, it said it was APRA’s view that “even 185 funds (which offer more than 40,000 investment options) is still a large number and means the industry is probably not operating with maximum efficiency”.