Super fund mergers: What does it mean for members?

A notification that your super fund is about to merge with another may come as a surprise, not to mention an unwanted demand on your time.

Some people have a strong connection with their fund through its association with the industry or business sector in which they work, so the idea of merging with a fund they may never have heard of can be unnerving.

The good news is that your fund is not alone. Fund mergers are common and while they sometimes indicate poor performance they are just as likely to be about improving outcomes and services for members.

Why are funds merging?

Industry reforms have put super funds under increased pressure to merge, introducing a new level of pragmatism on the trustee boards responsible for these funds. While their heritage might be rooted in industrial negotiations and agreements, they recognise that this connection will be less important in future. Instead, funds realise their future will depend on delivering optimal retirement benefits to members at minimum cost.

The 2021 Your Future, Your Super (YFYS) legislation got the ball rolling. Regulations now require funds failing to meet APRA’s performance tests to report their underperformance to members, while persistent underperformance will prevent them from signing new members.

Industry observers believe the pace of mergers is beginning to slow, following the forced mergers of underperforming funds identified by APRA performance tests and many of the more obvious megamergers such as the formation of Australian Retirement Trust and Aware Super.

However, further mergers are likely given the ongoing imperative to create sustainable super funds able to provide the investment returns and services required by members in a rapidly changing world.

In the five years to June 2024, the number of APRA-regulated funds (including industry, retail, corporate and public sector funds) fell from 190 to 111.

Industry analysts and commentators agree the industry will eventually be dominated by between six and a dozen megafunds, which will absorb most new entrants to the workforce.

Which super funds have merged or are due to merge?