A 60% decline in the number of superannuation funds is being forecast over the next decade by major consultancy, KPMG.
In a new report released this week, KPMG has joined the list of other players suggesting that in five years’ time the current 217 funds being regulated by the Australian Prudential Regulation Authority (APRA) will have shrunk to 138 funds.
What is more, KPMG is suggesting that more industry superannuation funds will be subject to consolidation than their retail counterparts.
The KPMG research also points to a steep increase in the size of announced mergers in 2019 compared with a year earlier.
It said that in 2019, the average size of the fund being transferred was $22.3 billion in funds under management (FUM) compared to just $1.5 billion the previous year.
It said the number of members moving from smaller to larger funds was 2.1 million in 2019 compared with 0.2 million in 2018, while the size of the receiving fund was $57 billion compared to $17 billion in 2018.
Commenting on the research, KPMG head of wealth and asset management, Linda Elkins said that merger activity had ratcheted up across all categories over the past year.
“The greater pressures put on all funds by the COVID-19 pandemic will only increase this,” she said. “Significantly, we are beginning to witness the announcement of larger-scale mergers in addition to the more common smaller fund consolidating into a larger fund.
“This demonstrates funds are becoming increasingly ambitious in their pursuit of scale, and, for many already large funds, targeting smaller sub-scale funds may not be the best mechanism to achieve a material outcome in regard to scale and its associated benefits.”
Elkins said an increasing number of Australia’s superannuation funds were going to achieve a scale over the coming years unprecedented in our economy, positioning a number of these funds as some of the largest globally.
“With this growth, comes significant implications and opportunities across our economy, political environment and the retirement outcomes of all Australians,” she said.
Elkins suggested the current 38 industry funds would number 21 in five years’ time and just 12 by 2029, while the existing 118 retail funds would have shrunk to 74 in five years and 52 within a decade.