So your super fund is merging - here's what that means for you

Australia's superannuation industry continues to consolidate, as large funds hoover up their smaller peers.

Here's a rundown of the current mergers in the works, why they're merging, and how it affects you.

Major mergers

Cbus and Media Super

These two officially signing a successor fund transfer deed in early September, paving the way for a merger that will manage about $60 billion on behalf of 840,000 members nationally.

Cbus will retain the Media Super brand for the purpose of communicating with members working in print, media, entertainment and the arts, while all investment, management and back-office functions will be combined.

"In an environment where the complexities of regulatory change, investment opportunities and member demand for digital and advisory services are growing, it is becoming increasingly difficult for smaller superannuation funds to remain cost-competitive and provide members with more choice and opportunity to grow their retirement savings," says Media Super chair Susan Heaney.

"As part of a larger fund, our members will benefit from the cost benefits of increased scale, access to new opportunities in investments and ever-improving products and services," adds CBUS Super chair Steve Bracks.

Hostplus and Statewide Super

Statewide Super and Hostplus are pressing on with merger talks, having signed a Heads of Agreement in early August.

If it goes through, the combined fund would represent more than 1.4 million members hold more than $90 billion in funds under management.

Hostplus and Intrust

Separately, Hostplus has signed a successor fund transfer deed with Intrust, with the merger set to complete on November 26.

Hostplus managed about $66 billion in assets and has 1.25 million members, while Intrust has about $3 billion in assets and 90,000 members.

"The merger to be completed later this year, places the best interests of both funds' combined members at the forefront of our approach to ensuring continued growth, competitiveness, sustainability, and success," says Intrust Super's Chief Executive Officer, Brendan O'Farrell.

"The continued growth of Hostplus will help to further secure strong retirement outcomes for Intrust Super members now, and into the future"

AustralianSuper and LUCRF

The Labor Union Cooperative Retirement Fund (LUCRF) will soon be gobbled up by Australia's largest super fund, AustralianSuper.

LUCRF has more than 132,000 members and about $7.4 million in funds under management, while AustralianSuper currently has more than $225 billion in funds under management and more than 2.4 million members.

"LUCRF Super has specialised in taking care of the retirement savings of a large proportion of the lowest paid workers in Australia for more than four decades and we are certain that a merger with AustralianSuper will continue to provide the best value and benefits to members," LUCRF chief executive Charlie Donnelly said in July.

Aware Super and VISSF

Aware Super and the Victorian Independent Schools Superannuation Fund (VISSF).

VISSF has roughly $900 million in funds under management across 6700 members.

"With increasing regulatory reform and growing trustee obligations, we recognise the importance and advantage of scale and size in the current environment," says VISSF chair Peter Sharples.

Why merge?

As some of the above comments reflect, the mergers have been borne out of the inability of smaller funds to compete with the scale efficiencies of bigger funds.

According to the Australian Prudential Regulation Authority, funds with less than $30 billion in funds under management will struggle to compete with the industry's mega-funds. This narrative has its roots in the 2018 Productivity Commission report, which found a market saturated with 29 underperforming MySuper funds.

"Larger funds are better placed to deliver stronger investment performance and lower fees," APRA deputy chair Helen Rowell said earlier this year.

What it means for you

But does a merger always lead to happier days?

Not necessarily.

"The danger is that you go into a merger and sit back and think that all of a sudden scale benefits are going to full out of the sky and you're going to operate at a lower cost base," says Ross Barry, chief investment officer of Spirit Super.

There are also reasons above and beyond economies of scale that can complicate mergers.

Incompatibility between funds can take cultural and operational forms, according to Genene Wilson of Finesse Financial Advisers.

"Often issues with merging portfolios will not emerge until very late in the piece. Operational and even cultural differences may come to light that may impact members for a period, such as unit pricing and how investment decisions are made."

Moreover, ostensibly similar products may in fact be very different.

"Many funds do not have like-for-like offerings," says Marisa Broome of Wealth Advice.

"A balanced fund can mean very different things between funds so you should always assess your investment strategy and make sure it is appropriate for you."

When trying to wrap your head around whether the new merged fund is right for you, the product disclosure statement is a good place to start. It will include the benefits, risks, fees and costs of investing in the fund, as well as the investment mandate.

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