First State Super and Health Super have signed an in-principle agreement to merge, forming a $28 billion super fund with 750,000 members.
The fund would be one of the five largest superannuation funds in Australia based on funds under management.
The merged entity will be led by First State Super chief executive Michael Dwyer, while Health Super chief executive Chris Clausen will become deputy chief executive.
"There is a lot of discussion in the industry about the benefits that scale offers to members," Dwyer said yesterday.
"We have been talking to a number of funds, including Health Super, for some time. We've know them for some time and have a very good understanding of their culture and their approach to business, and those discussions have now led to the decision by both boards that there are benefits to be gained for members."
Both funds have agreed to work towards a target merger date of 30 June 2011, subject to due diligence.
First State Super has one of the lowest priced superannuation options in the market at a cost of 37 basis points.
Dwyer said the two funds had started research into the best product range for the combined fund.
"Our aim is to offer the best range of services at the best cost we can," he said.
He did not want to say whether the costs of the products would rise, although he did emphasise costs would remain low.
"We hold our cost structure as very important, but we want to offer the best value," he said.
He could not say what impact the merger would have on the staff of both funds.
"It's too early to say," he said.
Most of Health Super's members are in Victoria in the health and community services sectors.
First State Super is a multi-sector fund that covers most employees working in the public sector in New South Wales.
Australian Institute of Superannuation Trustees (AIST) chief executive Fiona Reynolds congratulated both funds on reaching the landmark decision to merge.
She said the merger was part of an industry trend towards consolidation and backed up AIST's submission to the Cooper Review that there was no need to mandate fund mergers as these were occurring naturally.
