NGS Super/Australian Catholic Super cancellation leaves question mark over future mergers

There have been eight superannuation fund merger announcements since the start of 2021 but the cancellation of the NGS Super and Australian Catholic Super indicates it is not always a smooth process.

On Wednesday, NGS Super and Australian Catholic Super said their planned merger was no longer in the best interest of clients as the regulatory and commercial environment had changed since the initial announcement in August 2020.

The Australian Prudential Regulation Authority (APRA) had previously indicated that it was “not convinced” by all the planned mergers of super funds, particularly when it was between two small funds.

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This contrasted with a smaller fund being acquired by a larger player such as Hostplus and Australian Super, which were among Australia’s largest super funds, acquiring Statewide Super and LUCRF Super respectively.

The mergers that were confirmed this year so far were Hostplus and Statewide Super, Australian Super and LUCRF Super, QSuper and Sunsuper, LGIAsuper and Energy Super, Hostplus and InTrust Super, EISS Super and TWU Super, Toyota Super and Equipsuper, and Tasplan and MTAA.

There had also been discussions between Sunsuper and Australian Post Super, Aware Super and VISSF, and Hostplus and Maritime Super.

The Your Future, Your Super reforms, which came in force in July, would also continue to drive mergers in the space in order for funds to have the scale to carry out innovation in product and service offerings.

A report by KPMG, earlier this year, said that mergers were the number one challenges in the super space for 2021, which would be driven by maturing regulatory settings, business model sustainability, separation and integration, globalisation and rising member expectations.

This would culminate in the rise of the mega fund (over $100 billion) and a widening gap between the sub-mega funds (over $50 billion) and those which were smaller than that.

The five main mega funds would be the newly-merged QSuper/Sunsuper/Australian Post Super, AustralianSuper, IOOF and MLC, AwareSuper, and AMP which could expect to account for 47% of assets under management in the future.

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