Australia’s two top nonprofit pension plans are merging to create a mega-superannuation fund.
First State Super and VicSuper, which started talks earlier this year, hope to become a A$120 billion ($84 billion) plan by June 30, 2020. This would make them the second-largest superannuation fund on the continent, behind AustralianSuper ($112 billion).
Michael Dundon, VicSuper’s chief executive officer, said the merger would open investment options previously unavailable to the fund as it is the smaller of the two, at $15.4 billion.
The merger is part of a recent trend in the superannuation industry as the Australian Government wants funds to consolidate to improve performance and cut costs.
Supers have admitted that issues regarding mergers go beyond how they produce good returns together. There are also structural and cultural problems. Funds that are merging are also struggling with deciding who will lead the new fund once the union is forged.
First State Super said it has not yet decided on the new organization’s future operation model, but early plans show its CEO Deanne Stewart would be CEO of the merged fund while Dundon will stay on to help with the transition.
A superannuation fund manages the pension assets of an entire sector, such as health care or construction. Both plans cover nurses, police, firefighters, and teachers in different regions. First State Super handles the workers in New South Wales (a state that contains Sydney), while VicSuper services employees in Victoria (Melbourne). The new plan would manage the retirement savings of more than 1.1 million Australians.
Other funds to merge this year Down Under have been SunSuper and AustSafe Super, totaling their assets to $46 billion. The move is expected to save about $7 million per year.
EquipSuper and Catholic Super are expecting to complete a deal next year, bringing their value to $18.2 billion.
First State Super could not be reached for comment.
Related Stories:Two More Australian Supers Considering Merger
Australian Supers to Post Common Data on Their Performance
Two Top Australian Supers to Merge