Software company Bravura Solutions has released a white paper entitled Top 10 trends in the Australian superannuation industry: Why funds must bite the system modernisation bullet.
In a section on industry consolidation, the white paper noted that consolidation is occurring on “multiple fronts” across the superannuation industry.
“Through mergers and acquisitions, small and medium sized industry funds are being acquired by larger funds,” said Bravura.
Defined benefit and corporate schemes are being rationalised into corporate retail master trusts, and auto-consolidation is “actively working to reduce the number of superannuation accounts”, said the white paper.
In fact, auto-consolidation is expected to see the number of superannuation accounts reduced by over 30 per cent, from 30 million to around 20 million, said Bravura.
“Designed to address the inefficient, inequitable situation whereby members with more than one superannuation account are charged multiple fees, this process will have substantial implications for the pricing and profitability of funds,” said the white paper.
The loss of fee revenue via the auto-consolidation process coincides with calls on a “number of fronts” (most notably, the Financial System Inquiry) for super funds to “rein in their fees”, said Bravura.
“The reality is the industry is coming under fee compression and providers need to react quickly or [they] will lose the competitive battle in this increasingly transparent environment,” said the white paper.
But there continues to be a “degree of resistance” in some corners of the industry, Bravura said.
“One of the greatest challenges facing the industry is a sense of complacency and the propensity to blame the regulatory change burden,” said the white paper.
“For too long, Australian super funds have been afforded a relatively lucrative business with mandated growth, without the need to pursue cost competitive practices or proactively campaign to win and retain members,” it said.
However, the more savvy funds have realised the days of endless growth are over, according to Bravura.
“In the future superannuation landscape, successful funds will be those that pursue economies of scale through consolidation, embrace cost competitive practices and battle to win and retain business,” the white paper said.
“Modern flexible platforms that support simplification and rationalisation, as well as drive operational efficiencies, will be central to industry consolidation.”
