The merger of Sunsuper and AustSafe Super will grant AustSafe members an immediate reduction in fees, while Sunsuper members will also benefit from the additional scale.
Commenting on the merger, which will come into effect in March 2019, Sunsuper chief executive Scott Hartley says market conditions make it prudent for funds to consolidate as a way to improve outcomes for members.
“If you are [a large not-for-profit] and you have efficient operations, there are benefits of scale,” Hartley says. “There are benefits of scale in both administration and investments. So, when you compare the fees across the industry, it tends to be the large not-for-profits that have the lower administration fees. They also tend to have higher net returns over long periods of time.”
To illustrate the fee difference, an AustSafe member with a $50,000 balance will save $172 a year under Sunsuper’s fees, Sunsuper states. This represents a 23 percent savings.
AustSafe brings 100,000 members and $2.4 billion in funds under management to the transaction, which will make Sunsuper one of the nation’s biggest superannuation funds. All up, it will now boast more than $58 billion in funds under management, 130,000 employers and 1.4 million members.
Hartley says the super industry is maturing and with growing pressure on funds to perform, those that can capitalise on their scale by being efficient tend to produce better results.
He added that the Hayne royal commission has highlighted fragmentation – that the industry has too many players. Therefore, the general expectation is that super fund trustees will consider consolidation to benefit their members, Scott explains.
“In the case of AustSafe, as it was with Kinetic, the trustees have acted selflessly and in the best interest of their members,” Hartley says. “This is to be commended.
“Our average cost to serve our 1.3 million members reduces as we grow our member base. So, the cost of serving the AustSafe members is…a lot less than our average cost to serve.”
While Sunsuper has not actively been seeking mergers, AustSafe Super has been looking at such deals for a number of years.
“The focus has been on ensuring a good fit for our members and maintaining relevance and focus on rural and regional Australia,” AustSafe chief executive Craig Stevens says. “AustSafe Super has a strong connection with rural and regional Australia and Sunsuper understands this. The merger will allow Sunsuper to leverage our presence in rural and regional communities and industries and will provide stronger outcomes for members in these areas.”
Stevens also supports the idea that greater scale will deliver better member outcomes, especially in an increasingly competitive and complex environment.
Details of any staff changes following the merger have not yet been confirmed. The deal is being seen as an opportunity to expand the fund’s national presence, a Sunsuper spokesperson says.