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Mergers prompt 13% fee drop

Members of merged superannuation funds are $15,000 better off in retirement, new research shows.

An analysis by Super Consumers Australia (SCA) found MySuper fees of merged entities dropped by 13.4% on average.

The consumer advocate group looked at eight mergers that occurred in 2019 and 2020; six were single successor fund and two involved consolidating but maintaining two distinct product offerings.

SCA found that members in non-merged funds saw their fees decrease by just 2.76% over the period.

"In all mergers considered members of the junior partner (the smaller fund) experience reduced fees, as do members of the majority of senior partners," the report said.

"We find that 29% of the funds in our sample can be classified as underperformers in terms of their investment performance and that they are involved in 40% of the mergers we analysed. All of these underperforming funds have already finalised their mergers."

SCA director Xavier O'Halloran said it is clear that in superannuation size matters. "Responsible super funds are looking to find merger partners so they can pass efficiency gains on to members in the form of lower fees," O'Halloran said.

"While the mergers are encouraging, we hoped to see more underperforming funds opt to merge with a stronger partner."

Several mergers are currently in the works, LGIAsuper and Energy Super; NGS Super and Australian Catholic Superannuation and Retirement Fund; QSuper and Sunsuper; and Media Super and Cbus.

WA Super recently folded into Aware Super, while MTAA Super and Tasplan will be known as Spirit Super from April 1.

Research from Rainmaker, which spanned over three years, found that merged entities passed on a 20% fee saving to members.

Across 11 mergers, the more expensive fund's fees were lowered and members saw 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%.

Rainmaker executive director of research Alex Dunnin said fees do not go down just because a super fund merges, they go down because the trustees redesign the product.

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

O'Halloran added that APRA's performance heatmap shows there are still 18 struggling funds which, on SCA analysis, are chronically underperforming.

"More pressure needs to be applied see this long tail of underperformers cleaned up," he said.

Read more: RainmakerCatholic SuperAPRAAustralian Catholic SuperannuationAware SuperCbusEnergy SuperEquipsuperMedia SuperMercer Super TrustMTAA SuperMySuperNGS SuperQSuperRetirement FundSpirit SuperSunsuperSuper Consumers AustraliaTasplanVirgin SuperWA SuperXavier O'Halloran
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