Super fund mergers leave members $15,000 better off

“Underperforming funds need to find a partner or get off the dance floor” – Xavier O’Halloran, Super Consumers Australia director

A recent spate of super fund mergers will save members thousands of dollars in fees, according to new research by Super Consumers Australia. 

The independent consumer advocate analysed mergers between super funds since the beginning of 2019.

“MySuper fees charged to consumers decreased by an average of 13.4% among merged funds, compared to just a 2.76% decrease across funds that didn’t merge. This would leave a person an estimated $15,000 better off in retirement.” says Xavier O’Halloran, Director of Super Consumers Australia.

“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.” 

“While the mergers are encouraging, we hoped to see more underperforming funds opt to merge with a stronger partner,” says Mr O’Halloran.

In 2019, the Productivity Commission found underperforming funds cost members hundreds of thousands of dollars in foregone investment returns. 

“APRA’s performance heatmap shows there are still 18 struggling funds which on our analysis are chronically underperforming. More pressure needs to be applied see this long tail of underperformers cleaned up,” says O’Halloran. 

The Federal Government’s new annual performance test, introduced into parliament this week, will likely prompt more mergers. Funds that fail to meet the benchmark two years in a row won’t be allowed to accept any new members unless they improve. 

“Being barred from adding new members creates a very powerful incentive for funds to either shape up or merge. This will be important legislation for turning the screws on underperforming funds and ultimately boosting the retirement savings of Australians,” says O’Halloran.  

“Underperforming funds need to find a partner or get off the dance floor.”