Super mergers are ahead but the era of megamergers is over, says TWUSUPER chair Nick Sherry

As Team Super emerges from the TWUSUPER-Mine Super amalgamation, its co-chair Nick Sherry says he doesn’t expect any more consolidation of megafunds.

Former Rudd government minister and superannuation industry veteran Nick Sherry. Picture: Lyndon Mechielsen

The new $20bn fund to be formed from the amalgamation of Mine Super and TWUSUPER could consider more merger deals, TWUSUPER chair Nick Sherry says.

But he said the fund, which will be renamed Team Super to reflect its base in the transport, energy, and mining sector, did not want to become a megafund.

“We are very interested in discussing further mergers,” Mr Sherry said, after the announcement on Tuesday of the combined fund’s new name.

“But it is important that we remain focused on the transport and mining sector going forward.

“We are not aiming to become a megafund. One of the dangers of some (super fund) mergers we are seeing is that you can lose focus on the particular characteristics of the workforce which are important from a superannuation perspective.”

He said insurance, including disability and salary continuance insurance, was one area where there could be differences for each industry sector.

Mr Sherry has been involved in the superannuation sector since the launch of hospitality industry super fund, Hostplus in 1988, and the later establishment of Club Super, which went on to merge with Hostplus in 2019.

The first ever minister for superannuation in the former Rudd Labor federal government in 2007 will become co-chair of the new fund when the merger is finalised in May 2024.

He will share the role with the current chair of Mine Super, Christina Langby, who is director of finance at the NSW Minerals Council.

The merger will bring together Mine Super, which was established in 1941 to service the mining sector and now has assets of $12.5bn and 55,000 members, and TWUSUPER, one of the new industry super funds established in 1984 for the transport sector, which now has assets of $6.5bn and 99,000 members.

The current chief executive of Mine Super, Vasyl Nair, will run the combined fund.

Mr Sherry said mergers between super funds would continue to be a feature of the $3.5 trillion sector going forward.

During the past few years there have been a series of super fund mergers thanks to the Australian Prudential Regulation Authority pushing smaller funds to merge. One of its officials suggested $30bn could be an efficient minimum size for funds in the future.

But Mr Sherry said the era of megafund mergers, such as the recent merger between QSuper and Sunsuper which formed the $260bn Australian Retirement Trust in February 2022, was probably over – and more consolidation was happening between smaller or medium-sized funds, or larger funds absorbing smaller ones.

Scale was important in being able to deliver more efficient service to members which demanded more investment in digital and IT platforms, Mr Sherry said.

He noted it was also important in coping with increased regulatory pressures and the increased pressure on super funds to provide more retirement income products in the future.

Mergers have seen the total number of industry super funds more than halve to the current level of 22, while the number of corporate sector funds has come down from more than 2500 to about nine as corporate funds have been absorbed by larger funds – particularly industry funds in recent years.

Mr Sherry said although the sector currently has several $100bn-plus funds, including the $300bn AustralianSuper and $260bn ART, he did not want it to become dominated by a big four or five as was the case with the banking industry.

“We have had a rush of mergers over the past five years across the range, involving small to medium and large-sized funds, but that is now tailing away,” he said.

“We have the big eight in the industry super fund space and the big four in the retail super space, which will continue to have good growth.

“But I don’t think growth is going to be driven by mergers anymore.

“We will see some continued activity amongst small and medium funds going forward.

“I see a slowdown in mergers and a more gradual consolidation.”

He said he could foresee the superannuation sector consolidating to having some 20 to 30 major providers across the sector, from retail to industry and public sector funds.

“There are economies of scale but in a system so large at $3.5 trillion, there is room for 20 to 30 funds,” he said.

“But I would not want to see the system evolve to one like the banking system where you end up with four or five major players.”

Mr Sherry said the merger between Mine Super and TWUSUPER, which was initially announced in December 2022, had taken a bit longer than other mergers as both funds were moving to a new platform provider – US administration service giant SS&C Technologies Holdings.

Mine Super became the first Australian fund to agree to move to its platform, under a deal announced in December 2022.

Mr Sherry said Mine Super was completing the transfer to the new platform at the moment, and TWUSUPER would move from its current provider, Mercer, to SS&C in the first quarter of 2024.

He said most of the platform providers working for the super sector in Australia had experienced “challenges” in recent years.

“We have taken the opportunity of the merger to move to a new provider,” he said.

“It is part of our modernisation program going forward. SS&C are a massive global provider.

“A major focus of our merger will be to examine all aspects of our service as well as the provision of investment and insurance.”

He said the merger would result in a reduction of fees charged to members.

But it would also mean the fund was better placed to invest in new digital platforms as there was more focus in the sector fulfilling the requirements of the retirement income covenant including the future role of super funds in providing financial advice to members.

“The merger is not just about bringing together the past into a large fund, it has been a good time to do a fundamental reassessment of where we are going in the future,” Mr Sherry said.

“In today’s world there is a much greater focus on how you service members.

“It is a fundamentally different world than the world when I was first involved in super in the 1980s and 1990s.”