The Productivity Commission's recommendation of a 'best in show' list for superannuation funds will not be adopted, according to KPMG.
In a new report, KPMG states it is highly unlikely a shortlist of default super providers will eventuate. This is based on the reaction of legislators, the majority of industry participants and numerous expert commentators, KPMG said.
Coupled with the recommendation that individuals only have one default account for life, if adopted the measures will undoubtedly drive massive industry consolidation, the consultant said.
"What is clear is there will soon be significant changes to default arrangements which will reduce the number of superannuation accounts in the system, and the number of funds eligible to receive default contributions. Both provide additional motivation for industry consolidation," the report reads.
In December 2017, there were 23 corporate funds, 18 public sector funds, 38 industry funds and 118 retail funds regulated by APRA.
According to APRA, it now regulates 22 corporate funds and 116 retail funds. The number of industry and public sector funds remain the same. In the same period, the total number of APRA-regulated funds has dropped from 2149 to 2004.
Last week APRA chair Wayne Byres told the Senate Economics Legislation Committee the regulator has "upped the ante" over the past year in identifying underperforming funds and challenging trustees to justify how they're delivering value.
In doing so, 28 funds were reviewed and 13 of these have either chosen to exit or are on their way out, Byres said.
Seven opted to change product pricing or fees to increase competitiveness, while a further five were discovered to have better performance than first appeared.
However, the remaining three funds are yet to determine a course of action but are expected to do so shortly, Byres said.
In 2018, KPMG projected the industry would halve via consolidation over the next 10 years.
"KPMG believes this level of industry consolidation may occur sooner than previously forecast. A number of tailwinds supporting industry consolidation have developed, or increased in likely impact, over the past year and are worthy of note," the report reads.
This will likely be helped along by individual member movements, with latest APRA statistics showing the shift in assets across super funds over the last 12 months.
Data for the December 2018 quarter shows assets held in industry super funds dropped $23.1 billion in the previous three months, from a total of $652 billion to $629 billion.
The retail sector also saw significant decline, dropping $39 billion from $628 billion to $589 billion during the quarter.
Public sector funds lost about $7 billion, while corporate funds lost $2.6 billion.