Speaking at the Investment Administration Conference in Sydney yesterday, JP Morgan executive director, senior superannuation relationships, Seamus Collins said Australia is a long way behind the Scandinavian pension systems when it comes to keeping costs down.
“If you look at the leading markets like the Scandinavian, Canadian or [Dutch] markets, they still have vastly bigger scale,” he said.
“They have a relatively small number of funds for a smaller sized savings pool and so of course they drive efficiencies and they drive service providers to deliver efficiencies. It does come down to largely scale,” said Mr Collins.
The Australian market, on the other hand, is highly “fragmented”, with a large number of small- and medium-size funds, he said.
“In our top end, our very biggest funds start to approach the cost efficiencies of these offshore markets,” said Mr Collins.
“But the fact remains that the industry is still too fragmented. There are still too many players, and there are certain systemic efficiencies that we can’t realise because of the relatively long tail.”
Mr Collins chaired a panel discussion titled ‘What makes a successful merger?’, with panelists including First State Super chief operating officer Graeme Arnott.
Mr Arnott, who oversaw his fund’s merger with Health Super, pointed to some of the issues to consider when undertaking a super fund merger.
“It doesn’t matter what size you are – a merger of any size introduces a whole lot of risk, and you must manage that risk. And obviously the bigger the merger, the more value there is in applying controls to those risks,” he said.
Mr Arnott also stressed the importance of partnering with custodians during the merger process.
“In any of these transactions you have lots of advisers who are keen to add value and add to your decision-making,” he said.
This is particularly relevant when it comes to a change in the ‘beneficial owner’ of certain assets, Mr Arnott added.
“Be aware that people will be offering to assist you in the assessment of South African stamp duty and Irish stamp duty, then if you do the calculation their [fees] will be more than paying the stamp duty,” he said.
“If you just ask your custodian, they are – without being an adviser – they have done many of these asset moves either in mergers or in other transactions.
“They are probably far more experienced than any other Australian-based adviser will be on how things operate in different jurisdictions and how to achieve relief – if relief is available.
“We almost learned that the hard way, but we got there in time,” Mr Arnott said.
