Consolidation of the superannuation industry to continue

Alison Banney 24 February 2017

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Superannuation warning: The number of super funds could drop by 39% by 2021.

The superannuation sector (excluding Self Managed Superannuation Funds ) has shrunk by 72% in the past decade alone, going from 872 funds to just 244 in June 2016, according to the latest Rice Warner Superannuation Market Projections Report.

This consolidation is expected to continue over the next five years. “Consolidation within the industry has and will continue to be one of the main driving forces that shapes the industry,” the report said.

It warned that continued merges could likely lead to another 39% drop, bringing the number of funds down to just 149 by 2021. These funds are predicted to comprise a mix of corporate funds, industry funds, public sector funds, and retail funds.

According to the report, mounting regulatory and competitive pressures were the main drivers of this consolidation, revealing that there were 83 funds with negative net flows in 2016.

“It is not reasonable to expect these funds to be able to provide their members with the best possible service whilst under this type of fiscal pressure. Additionally, funds compete now on services more than any other point in the history of superannuation,” said the report.

It also found that as operating expenses decrease with scale, smaller funds will find it more and more difficult to compete.

Now more than ever it’s important to compare superannuation funds to ensure your account is right for you.

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