South Australian superannuation funds StatewideSuper and Local Super are in 'detailed discussions' about merging, which would see the creation of a $4 billion super fund.
The boards of the two funds said preliminary reviews indicated that a merger may be in the best interests of their members, but warned full due diligence would still need to be completed and shareholder approval received before a merger could take place.
A target date for the completion of the merger has, therefore, not been finalised yet.
"We have really been in discussions since late last year, so yes it is in response to the government's Stronger Super initiatives," StatewideSuper chief executive John O'Flaherty said.
"But we've been looking at it from the point of view of what is in the best interest of our members and it fits that test."
"It actually is an opportunity for us to consolidate in South Australia to bulk up and be a big fund," he said.
If the merger proceeds, O'Flaherty will become the chief executive of the combined fund.
"Both boards have agreed that I will be the new chief executive and that Nic Szuster will be my deputy," he said.
He expected that no staff would be made redundant.
"We have about 100 staff in StatewideSuper, and Local Super has about 19 staff, so we are going to put the two staff complements together," he said.
"We will make some efficiencies on the investment side and on new investments going forward, but we've decided that there will be no staff reductions as a result of the merger."
The Minister for Superannuation, Bill Shorten, recently announced that the government would extend the capital gains tax (CGT) rollover relief for merging super funds until the end of September this year, but in practical terms this will only apply to funds that are already in the process of a merger.
This means StatewideSuper and Local Super will miss out but O'Flaherty hoped Shorten would reconsider his position.
"We have actually written to the minister; we would have liked a longer CGT relief date. We understand the federal government's issues in relation to extending that further but I guess we would still hope that the minister might consider our case favourably and give us a bit longer time to do that," he said.
However, he said the merger would ultimately not be dependent on a positive response from Shorten.
The name of the merged fund is still to be decided, and potential options will be explored as part of merger negotiations in the coming months.
StatewideSuper has around $2.4 billion in funds under management while Local Super has around $1.7 billion.
