Mr Proebstl’s comments came in response to an Australian Financial Review article that suggested funds with less than $5 billion in funds under management (FUM) would inevitably be forced to merge.
Similar sentiments about smaller superannuation funds have intensified since the release of the 2010 ‘Cooper Review’ which noted the efficiencies of scale of funds with FUM of over $20 billion, he said.
Jeremy Cooper’s review in into the superannuation concluded that smaller funds should consider whether they had “sufficient scale … to continue providing optimal benefits to members”.
“Whether a fund should merge with another involves more deep and sophisticated thinking than simply drawing a numeric line in the sand that if a fund is less than $5 billion it should merge,” said Mr Proebstl.
“One key benefit of smaller super funds is that they are better placed to understand and therefore meet the expectations of their members. They know their target market well and therefore can more efficiently access and serve their niche market,” he said.
He pointed to the “steep rises” in group insurance premiums for larger funds as an example.
“A number of large super funds have announced very substantial increases in insurance premiums including 38 per cent by AustralianSuper, 52 per cent by REST and 27 per cent by CareSuper,” said Mr Proebstl.
The “consistent membership and risk profile” of smaller funds can allow them to control premiums, he said.
“legalsuper has a more homogenous membership relative to some of the larger super funds that target membership across a wide range of occupational groups often with very different risk profiles,” said Mr Proebstl.
“This is why, despite dramatic premium hikes being announced by larger funds, legalsuper has been able to secure a three-year freeze on insurance premiums,” he said.
The fund has also been able to increase member insurance benefits “at no extra cost”, he added.
