Last week, Tasplan chief executive Neil Cassidy warned about the effect super fund mergers would have on administrators.
"The Cooper review has alluded to consolidation in a bid for funds to achieve economies of scale and reduce fees, but this belies the administrative minefield we may be approaching, given the small number of administrators in Australia who have the capacity to manage funds," Cassidy said.
As a director of administrator Pillar, superannuation lawyer Noel Davis believes the push for mergers would have "significant issues" for administrators.
Davis highlights that administrators face a minefield of challenges, including different information technology (IT) systems, data quality and different benefit designs when undertaking fund mergers.
"Even if two funds that are looking to merge are on the same IT system, administrators would still face significant staffing issues," he said.
As a former mergers and acquisitions lawyer, the urge to merge probably feels natural for Cooper review chair Jeremy Cooper.
Cooper has already spoken out about the need for mergers to achieve the economies of scale, as highlighted by Cassidy's comments.
However, Freehills senior associate Natalie Gullifer said it is important to note that fund mergers under the Cooper review are not proposed as compulsory.
"There are no dire consequences for administrators as under the Cooper review there is no compulsion for funds to merge," Gullifer said.
She acknowledged that administrators need to overcome capacity and technology challenges in order to ensure effective fund mergers. However, the Cooper review's super stream initiatives could address these issues.
"Cooper's super stream initiatives, such as the push for data standards, better account consolidation mechanisms and the drive for e-commerce in super will help administrators and funds overcome some of the obstacles towards consolidation," she said.
Ultimately, Davis said it will be the funds who decide the rationale behind mergers.
"Mergers are not necessarily better for members. A lot of smaller funds are effective in meeting the needs of their members. It will be unlikely that the government will set the pace for fund mergers. Mergers will be only be dictated by the funds themselves," he said.
