* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Download Super fund mergers could cross sectors
Document related concepts
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 theinstoreport. 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.