Who will survive amid super group consolidation?

Mike Taylor

Managing Editor/Publisher, Financial Newswire

31 January 2023

Amid confirmation that the Australian Institute of Superannuation Trustees (AIST) is in merger discussions with Industry Super Australia (ISA) questions are being asked about the ability of superannuation funds to sustain membership or multiple representative organisations.

As things currently stand, the two main organisations representing the superannuation industry are AIST and the Association of Superannuation Funds of Australia (ASFA), but the Financial Services Council (FSC) also boasts superannuation members such as AMP Limited, Australian Ethical, Colonial First State, Equity Trustees, Insignia Financial and Mercer.

Financial Newswire understands that some tentative overtures have occurred between ASFA and AIST over the past half-decade but that no significant progress has been made.

What is more, the formal statement issued by AIST around reports of the merger talks with ISA stated: “As part of their commitment to act in members’ best interests, ISA and AIST are exploring a merger to create a single voice for profit-to-member super funds in Australia”.

A comparison of the membership list of ASFA and the AIST reveals many superannuation funds holding dual memberships, including AustralianSuper, HESTA, Australian Retirement Trust, Cbus, Aware Super, ESS Super, Hostplus, Maritime Super, REST and TWU Super.

Superannuation fund executives have told Financial Newswire that they have had to look at the cost involved in maintaining multiple memberships of organisations such as AIST and ASFA in circumstances where the Australian Prudential Regulation Authority (APRA) is scrutinising expenditures in the context of member best interests.

“ASFA and AIST offer very similar services and so the question becomes which of the organisations represents best value for money,” one fund chief executive said.

He pointed out that hard decisions needed to be made about what in many instances represented discretionary expenditure.

While many industry superannuation funds have been members of both AIST and ASFA, most of the significant retail master trusts have been members of both ASFA and FSC with the most prominent being CFS, Mercer, Insignia Financial and Vanguard.

When it comes to decision-making on the part of the retail superannuation players, it is worth noting that Mercer chief executive, Davie Bryant and Insignia’s chief executive, Renato Mota both sit on the board of the FSC and Bryant is chairman of the FSC.

What is more, the latest material filed with the Australian Securities Exchange (ASX) shows that the FSC remained in the black last financial year, notwithstanding the exit of the major life insurers via establishment of the Council of Australian Life Insurers.