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The Insto Report
Super fund mergers could cross sectors
11 July 2013 | Wouter Klijn
The recent consolidation in the superannuation industry could potentially lead to industry
super funds and retail funds merging.
“Tria clients have confirmed that some proposals of this type are being circulated, and
considered in some cases,” Tria Partners managing partner Andrew Baker told
But the acquisition of an industry fund by a retail fund was not straightforward, Baker said.
Not-for-profit funds are often controlled by a trustee corporation and the shares of the trustee
corporation are typically held by the sponsoring organisations, including unions and
employer organisations.
In theory, an industry fund could merge with a retail fund if these organisations sold their
interest, but questions about who receives the proceeds of the sale and whether this would
be in the best interest of members remain unanswered.
Yet, it has been done in the past.
In 2001, Zurich Financial Services Australia bought the not-for-profit Accountants
Superannuation Fund Nominees as part of its member administration business.
Accountants Superannuation Fund Nominees was struggling at the time with many of the
same problems as funds do today: the regulatory burden and increased costs of compliance.
Zurich sold the industry fund again in 2006 to Professional Associations Superannuation,
which is now called Kinetic Super, bringing the fund back into the industry sector.
In a recent “Trialogue” column, Baker argued merger activity in the super industry had
progressed slowly, despite the Stronger Super reforms favouring further consolidation.
“It would be fair to say that the pace of consolidation has been a steady trickle rather than a
flood, and that Stronger Super does not seem to have changed the pace to any great
extent,” he wrote in the online industry note.
“The prospect of APRA (Australian Prudential Regulation Authority) scale tests does not
seem to be scaring many into mergers either.”
In part this is due to concerns around benefits to members, the impact of capital gains
taxation on the investment portfolio and compatibility of administration systems.
In part it is also due to political concerns by the stakeholders involved in the running of the
smaller industry funds, including trustees, and employer and union representatives.
But the difficulties around cross-sector mergers did not help matters, some clients told Tria.
“Perhaps surprisingly, [the question of whether you can sell an industry fund] also comes up
from not-for-profit funds as one explanation for why we haven’t seen more consolidation in
the market – particularly at the small end,” Baker said.