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Fees fall after super mergers: Research

Members whose super funds have merged in the last three years have seen their fees decrease by 20%, according to new analysis.

Rainmaker looked at 13 mergers involving 22 super funds; 11 traditional mergers, the integration of Virgin Super and Mercer Super Trust, and the joint venture between Catholic Super and Equipsuper.

Rainmaker found that in all 11 of the traditional mergers, the more expensive fund's fees were lowered, with members seeing an average fee drop of 21%. For the fund with lower fees going into the merger, seven of the 11 saw an average reduction of 5%.

Meanwhile, nine of the 11 funds saw fees drop or stay the same when comparing the average pre-merger fees against those post-merger, with the average fall coming in at 14%.

"Mergers have created efficiencies and economies of scale for the funds, which has led to members being better off," Rainmaker executive director of research Alex Dunnin said.

"Regulators and political leaders continue to heap pressure on funds to merge, particularly if they lack scale or consistently under perform."

However, fees actually went up for Virgin Super and Mercer Super Trust members and those in Catholic Super and Equipsuper.

"Fees don't go down just because a super fund merges, they go down because the trustees redesign the product," Dunnin said.

"Products are more likely to be redesigned in a merger but not when funds just combine their back offices."

Merger activity in the superannuation sector has ramped up in recent years, particularly following the release of the Productivity Commission's report that determined there were too many super funds offering too little value to members.

Most recently, NGS Super and Australian Catholic Superannuation and Retirement Fund announced their intention to merge, Cbus and Media Super have commenced due diligence, while First State Super announced plans to merge with WA Super just days after merging with VicSuper.

Also merging, MTAA Super and Tasplan are making progress. The two funds have announced the post-merger leadership team, revealing an almost all-female executive lineup.

Read more: Catholic SuperRainmakerEquipsuperMercer Super TrustVirgin SuperAlex DunninAustralian Catholic SuperannuationCbusFirst State SuperMedia SuperMTAA SuperNGS SuperProductivity CommissionTasplanVicSuperWA Super
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