Chant West: Up to 80 Superannuation Funds have insufficient scale

In an article published in the Sydney Morning Herald, (4 August 2015), Ian Fryer, Head of Research, Chant West said that based on the firm’s research, up to 65% of MySuper providers are too small to deliver benefits of scale and up to 80 superannuation funds will need to consider closure or mergers.

Fryer called on the Australian Prudential Regulation Authority (APRA) to enforce small funds with less than $5 billion in assets to ‘merge or fold.’   (There are currently 89 funds with less than $5 billion). He said, that those with more than $10 billion in assets are able to provide a better return and service to their customers, while charging less in fees.

Industry funds which Chant West research indicates should close include, Transport Industry Super, Law Employees Super, and Concept One and Club Super, all of which have less than $500 million in assets and charge up to 1.78% in fees.  Amongst the retail funds which should consider closure are Smartsave Super and AMG Universal each with less than $300 million and charging more than 1.28% in fees.

Mr Fryer said there are rare exceptions of funds with less than $5 billion in assets that can justify continuing at a small scale because they provide a valuable service to a specific member base.

He highlighted Mine Wealth + Wellbeing (formerly Auscoal), which has excellent insurance coverage for high-risk workers in the coal-mining industry.

Mr Fryer proceeded to present Chant Wests’ latest research at the Financial Services Council (FSC) annual conference on the Gold Coast, (5-7 Aug 2015) at which a key discussion was held around the Fair Work Commissions’ role in oversight of MySuper default selection.  While the Murray Financial System Inquiry and the Grattan Institute have both called for a revamp of the Fair Work Commissions’ role Fryer argued resources might be better deployed in a ‘crackdown on minnow funds’.

[Original Article by Sally Rose, appeared in Sydney Morning Herald, 4 Aug, 2015]

 

 

 

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