Suncorp will divest its wealth division to an industry fund, transferring $6.4 billion in assets under management and 137,000 members.
LGIAsuper will pay $45 million for the acquisition of Suncorp Portfolio Services and will retain about 130 staff that work within the wealth business.
LGIAsuper is in the process of merging with Energy Super, which upon completion and taking into account the Suncorp acquisition, will create a $28 billion fund with some 250,000 members.
"This acquisition, combined with the Energy Super merger, will achieve an ideal, sustainable fund size, while maintaining our status as a boutique and personal superannuation provider," LGIASuper chief executive Kate Farrar said.
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"With the superannuation industry consolidating rapidly, we want to see our Queensland-based funds thrive in an increasingly complex and competitive national market, and the best way to do that is together."
The merged entity promises that all members will see fees reduce.
Suncorp banking and wealth chief executive Clive van Horen said: "After extensive engagement with a number of potential acquirers, we believe that LGIAsuper is best placed to deliver sustainable member outcomes.
"The values and purpose of LGIAsuper, which is also headquartered in Queensland, align closely with those of Suncorp. This transaction will also enable the combined business to take advantage of size and scale benefits," he said.
Suncorp began scouting for potential buyers in February 2020, joining a herd of large financial institutions abandoning life insurance and superannuation.
Suncorp Portfolio Services landed in hot water at the banking Royal Commission for a number of issues that included withholding tax benefits from members, not being transparent about intra-company payments and dragging its feet in transitioning members to MySuper.
Its lifestage funds copped red ratings in APRA's 2020 heatmap for charging as much as 1.68% in exorbitant administration fees.
The transaction is due to complete by mid-2022. After this, Suncorp will enter into an agreement with LGIAsuper to distribute superannuation products to customers for 18 months.
The $45 million consideration includes a fixed amount of $26.6 million plus regulatory capital.