While acknowledging the benefits of superannuation industry consolidation, former Treasurer and current chair of Cbus Super, Wayne Swan, says the industry must be careful of the risks associated with too much merger activity.
Speaking at the Association of Superannuation Funds Australia (ASFA) conference on the Gold Coast, Swan said superannuation funds were critical to nation building during the Global Financial Crisis (GFC) and the pandemic.
During the GFC, super funds held about a quarter of equity on the Australian Securities Exchange and contributed at least 48% of capital raised throughout the crisis to the recapitalisation of businesses, he said.
“We can see, super has a big role to play in the nation, getting us through crisis, addressing climate change and building a more stable economy, society and critically, democracy.
“It's making the nation stronger. But how do we keep super strong? How do we give it a great future what comes next?
“My message is a simple one. Don't mess around with it. Give it bipartisan support. It's above politics. It benefits everyone.”
Swan acknowledged steady consolidation was creating good outcomes for members with funds gaining scale through mergers, lowering average administration costs, improving investment decision making and enhancing governance standards.
“Since the release of the first MySuper heatmap in 2019, mergers have delivered total fee savings of around $21 million per annum to approximately 350,000 MySuper member accounts.”
But, Swan said, endless consolidation came with its own risks.
“The benefits from consolidation must be balanced with those that come from competition, stability and responsiveness to members,” he said.
“We need the right structure of funds that are big enough to operate at an optimal level, large enough to reap the benefits of scale, numerous enough to maintain competitiveness and our sectors long tradition of innovation and quality service to each and every one of our members.”
Swan said the same effort devoted to developing the accumulation architecture over the last 40 years needed to be applied to developing the deaccumulation architecture.
“Retirement, the most crucial point in a member’s journey. Yet at retirement, members are left to wade through a deep dark swamp of complex choices about how to manage their money.
“The best retirement income systems provide people with more support and more simplicity. So the retirement income covenant is certainly a step in the right direction.”