Hostplus and Statewide Super merging next month to create $83 billion fund

Hostplus and Statewide Super will merge next month to create an $83 billion fund.

The merger, which was originally slated for April 1, will now take place on April 29, Statewide Super said in an update to members.

Following the combination, Hostplus will be home to 1.5 million members and $82.8 billion in retirement savings. Interestingly, while Statewide has far fewer members, millennials comprise only 35% while Hostplus is predominantly millennial at 53%, seeing a slight shift in demographics for the fund.

In merging, Statewide members will have access to more investment options, with Hostplus offering 16 options and a member direct platform versus Statewide's 11 options.

However, members will pay slightly more with Hostplus. Statewide's current total expense ratio sits at 1.10% while Hostplus' is 1.17% - industry average is 1%, according to Rainmaker Information.

A Statewide MySuper member with $50,000 saved currently pays $551 total each year, including administration fees and costs, investment fees and costs and transaction costs. With Hostplus, that same MySuper member will pay $616.89 per year.

That said, Hostplus' MySuper strategy has been a top performer in the single strategy category over all time periods and achieved 19.08% to December 31, 2021 compared to Statewide's 13.44%.

And other options offered by Hostplus are significantly cheaper than the equivalent currently offered by Statewide. For instance, Statewide's Sustainable Diversified option currently costs members $651 per year, while the Hostplus Socially Responsible Investment - Balanced option is just $281.89 a year.

The cost of insurance cover will also increase marginally for Statewide members, despite both funds sharing MetLife as group insurer and the policy terms being retained. Under the example provided, a 40-year-old member with four units of default cover in the Active occupation category will now pay $12.70 a week for death, TPD and income protection. Previously they paid $12.52.

In integrating the insurance arrangements, Hostplus will reduce the insurance administration fee it charges to 0.745% of the death and TPD premiums and to nil for income protection. However, Hostplus members will no longer directly receive the tax rebate effect.

"Merging the funds will bring opportunities for greater scale and cost efficiencies, which both trustees believe will result in enhanced member choices, services and outcomes," Statewide said.

"Members are expected to benefit from more competitive administration fees over the short to medium term and efficiencies in operating costs."

This article first appeared on Financial Standard

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