The great super fund freeze

Once again, this year’s Super Review Top Super Funds survey represents only a snapshot of the Australian superannuation industry rather than a long-term picture.

It represents a snapshot because so many things will change over the next 12 months, not the least of which being the number of funds in Australia, or at least those licensed as Registrable Superannuation Entities, with the latest Australian Prudential Regulation Authority (APRA) data suggesting that there may be fewer than 350 RSE licences ultimately issued.

Then, too, there is the continuing outsourcing of corporate superannuation funds and the ongoing merger activity, the most notable of which is that of the Superannuation Trust of Australia (STA) and the Australian Retirement Fund (ARF) — something which will give rise to a $20 billion industry funds behemoth.

But while our Top Super Funds survey confirms that consolidation remains the order of the day in the Australian superannuation industry, it also reveals that one size does not fit all. The number of funds with assets under $500 million may be falling, but there are plenty of trustee boards of smaller ‘boutique’ funds who have decided that big does not necessarily equal beautiful.

However, the underlying trend revealed by the survey is that the number of superannuation funds in Australia is reducing rapidly and that, ultimately, there may well be fewer than 300 funds of any substance.

Not revealed in the survey but noted in recent data released by APRA, the Australian Taxation Office (ATO) and the Investment and Financial Services Association is the fact that the growth of self-managed superannuation funds has begun to taper.

This tapering seems to be generally attributable to the work undertaken by the ATO in ensuring that people are better informed about what is involved in the running of a self-managed superannuation fund and, particularly, the shortcomings of such arrangements.

Notwithstanding the general decline in the number of funds in Australia, it is worth noting that the big are getting bigger — something not only demonstrated by the forthcoming merger of the ARF and STA, but also revealed in recent research that found people exercising choice are opting for well-established brands rather than the newcomers.

The bottom line of this trend is that a number of the major industry funds have reported strong inflows in the immediate post-choice environment, while retail majors such as AMP have reported similarly strong flows.

Something also worth noting from the results of the latest Super Review Top Super Funds survey is that consolidation is increasingly occurring amongst the superannuation service providers, including the administrators.

However, the consensus within the superannuation industry is that the single biggest factor driving superannuation fund consolidation is trustee licensing.

Fund executives cite trustee licensing because, they say, it serves to increase the momentum behind corporate superannuation outsourcing.

So which funds will not make it onto the Super Review top super funds list this year because of outsourcing or mergers. This list is by no means comprehensive but notes changes announced by the relevant funds and master trusts.