QSuper and Sunsuper confirm partnership talks

Funds confirm talks about a merger that would surpass giant AustralianSuper as the nation’s biggest.

It’s understood that the discussions between the two funds started around the middle of the year.

QSuper and Sunsuper have confirmed they are having discussions about a partnership which could lead to a superannuation behemoth with more than $180bn in member funds.

A combination of the two would create the nation’s biggest super fund, surpassing AustralianSuper’s $165bn in member funds.

In a joint statement on Monday night, the duo said the discussions were preliminary and non-binding.

“There is an absolute responsibility on trustees to consider how to best serve their members’ interests,” QSuper chair Karl Morris and Sunsuper chair Andrew Fraser said.

“Whether a partnership between our two funds could be better for both QSuper and Sunsuper members is an appropriate inquiry.

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“Whether or not that consideration proceeds beyond preliminary discussions is dependent on many factors.

Karl Morris, chair of QSuper. Picture: Adam Armstrong

“In the meantime, both Sunsuper and QSuper members may be assured they will be kept informed of any material decisions.”

It’s understood that the discussions between the two funds started around the middle of the year.

However, finalisation of a partnership deal is not thought to be imminent.

With the nation’s total super balances worth about $2.8 trillion, regulatory pressure is intensifying on trustees to consider mergers to achieve economies of scale.

Australian Prudential Regulation Authority chairman Wayne Byres said in August that the super industry was not delivering the right outcomes, as noted by the Productivity Commission.

“Trustees have not always been focused on members’ best interests,” Mr Byres said.

“Aggregate fees and costs are too high, insurance has not always been good value for money, and there has been too much inefficiency in the system,” Mr Byres said.

“And (the PC said) – very loudly and clearly – that regulators should do more to hold trustees to account to address those issues.”

Merger problems have been more a feature at the small-to-medium-sized end of the scale, with difficulties emerging over board structures and which fund should be the senior partner.

To remove bottlenecks, APRA has been given a long-sought directions power, the ability to take civil penalty action against trustees and their directors for breaching their obligations to members, and control over transfers of ownership of trustee licenses.

Mr Byres said the powers were a game changer, providing APRA with “genuine regulatory muscle” that had previously been lacking.

QSuper has 585,000 members and more than $110bn under administration.

It has $22bn in a defined benefit fund administered on behalf of the Queensland Government and $91bn in accumulation funds.

The QSuper membership is drawn from 75,000 employers.

While largely composed of current or former state public servants, it has diversified to allow family access since 2010 and has been an open fund since 2017.

Members have benefited from lower fees as the fund increased in size, with administration fees reduced last July for the third time in four years.

Its investment returns have been near the top of performance tables over the last decade, helped by its diversification into offshore infrastructure assets, property and private equity holdings.

Its equity holdings include stakes in Heathrow and Glasgow airports, the operation of shipping container terminals in 36 international ports, and part ownership of Kindercare, the largest private provider of childcare in the US.