Mandatory auto-consolidation of superannuation accounts of $1000 and below will have a significant impact on the revenues of funds, especially not-for-profit funds, as some funds will experience a reduction in membership of up to 25 per cent.
"You have to remember that for these funds their revenue is actually dollars per member per week," Tria Partners managing partner Andrew Baker said.
"So in a very simple sense, if you lose 10 per cent of your members, you lose 10 per cent of your revenue.
"Now, none of the funds operate on a 10 per cent surplus, so there would be issues in maintaining the level of services for members without changing the fee structure."
That could lead to a situation where funds decided to restructure their fee model, for example, by charging asset-based fees, Baker said.
"There is quite a lot of cost data in the industry that if you have less than 100,000 members, your costs go up quite substantially," he said.
"The risk here is that after auto-consolidation if you have less than 100,000 members, then you could end up with an uncommercial cost structure.
"You could close the gap by increasing fees to remaining members - and we will likely see more asset-based fees, for example. But you can't just keep increasing fees in isolation of what competitors (both collective and self-managed superannuation funds) are offering," he said.
At the announcement of the Stronger Super package in September last year, Financial Services and Superannuation Minister Bill Shorten flagged that the threshold for auto-consolidation would be raised.
Subject to a review by the Treasury, Australian Taxation Office and Australian Prudential Regulation Authority, the threshold for auto-consolidation of lost and inactive accounts would be increased to at least $10,000 in the latter half of 2014, Shorten said at the time.
Baker said that would roughly double the impact of auto-consolidation on funds.
"Because it is such a long tail, it is not 10 times the issue; it is about double. But even at $1000 it is going to have a huge impact," he said.
"For some funds it is just 2 or 3 per cent of their membership base, but we have seen funds where it is as high as 25 per cent of the membership."
A spokesperson from Shorten's office earlier this week confirmed an increase of the threshold to $10,000 by 2014 was still on the government's agenda.
