Fees slashed by five times more at merged super funds

Fees have been slashed for members of merged super funds, showing the push to squeeze out underperformers has paid dividends.

Research from advocacy group Super Consumers Australia has found average MySuper fees declined by almost five times more than funds that did not merge.

Fees have been slashed for members of merged super funds, showing the push to squeeze out underperformers by the prudential regulator has paid dividends.

Research from advocacy group Super Consumers Australia has found average MySuper fees declined by almost five times more than funds that did not merge.

The data revealed funds which merged in 2019 and 2020 delivered an average member weighted decline in fees of 13.4 per cent.

This was compared to an industry-wide decline in fees on MySuper accounts of 2.76 per cent in the same period.

The research shows the greatest decline in funds flowed through to members of junior funds that merged with larger super funds.

Members of larger super funds which merged with other smaller funds were better off in five of the eight mergers scrutinised by the researchers. In three of the mergers in this period, the fees of members of the larger funds actually increased.

Super Consumers Australia did not scrutinise fund mergers where it appeared there had been no consolidation, such as the recent acquisition of ANZ’s OnePath by IOOF.

The research found not all that merged were failing to deliver good investment returns, rather in many cases being held back by their size.

Super Consumers Australia director Xavier O’Halloran said the research showed the value of economies of scale for merged funds but noted there were upfront costs that could hit returns.

“There are obviously costs as part of those mergers, some of them are short-term while they’re combining systems,” Mr O’Halloran said.

“Some of those junior funds, it was a scale issue that was holding them back. We’d really expect in the longer term the mergers to pay off.”

The research comes as the APRA continues to push for mergers and has warned of consequences for underperforming trustees in Australia’s sprawling superannuation industry.