Consolidation hits super fund administrators

Two major fund administration providers are feeling the pinch of the new superannuation reforms.

Link Administration told shareholders that the new Protecting Your Super Package laws will impact its earnings and operations in the 2019 financial year.

The scope of regulatory change, member communication programs and adjustments to a range of fund product offerings has driven increased levels of activity through the organisation, it said.

"To manage this activity, we have supplemented our workforce with additional resources to meet the demand during [the second half of] FY2019."

Part of the new law requires the ATO to sweep inactive superannuation accounts, firstly in October 2019 and then in April 2020.

Link flagged that some funds are already moving to transfer inactive member accounts to an eligible rollover fund (ERF) to facilitate early consolidation, but the "principal impact" of the legislation will be felt in FY20.

Link did not disclose how much its earnings will be directly affected by the reforms, but forecasted that its full-year operating NPAT will be lower, and will fall between $195 million to $205 million (FY18: $206.7m).

Earnings will also take a hit as a result of remediation costs associated with a client migration in 2018. Link did not disclose the client affected.

Meanwhile, Mainstream Group has announced the wave of consolidation will continue to challenge growth opportunities as its super fund business is "performing below expectations." Superannuation clients comprise 7.5% of the group's FY19 revenue.

Combined Super Fund terminated its contract with Mainstream last September, after it merged Prime Super Fund. Mainstream's board is consequently considering ways to simplify and grow this division by expanding its service offering and undertaking a broad, strategic review of the business.

Read more: SuperannuationCombined Super FundLink AdministrationMainstream Group
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