Costs per member key to fund mergers

The Australian Prudential Regulation Authority (APRA) appears to be on the right track in pursuing further industry fund consolidation based on the quality of member outcomes.

The APRA approach, outlined by the regulator last year, has been validated by a Super Review/EISS Super survey conducted during the recent Association of Superannuation Funds of Australia conference in Sydney.

Survey respondents, mostly superannuation fund trustees and executives, were asked their views on the factors leading to fund mergers, particularly with respect to smaller funds.

And the overwhelming view was that funds needed to start thinking about mergers when their operating costs per member rose to unacceptable levels.

Asked what they believed was the most significant factor likely to influence directors of a fund to merge, 66.6 per cent of respondents cited operating costs per member, while only 10.2 per cent of respondents cited funds under management and only 15.3 per cent cited low average balances.

Perhaps importantly, only 2.5 per cent of respondents believed being subjected to APRA oversight ought to be a factor.

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FUM     10.20%

Operating costs per member  66.60%

Decline in member numbers  15.30%

Low average balances   5.10%

 Oversight from APRA   2.50%