Two of Australia’s largest pension funds are looking to merge, pooling their assets to form a A$110 billion ($78 billion) retirement kitty.
First State Super and VicSuper Pty made their consolidation talks public Thursday as they begin to “explore the benefits” of the move, which would make them the continent’s second-largest non-profit superannuation fund.
“We have a lot in common,” VicSuper said in a statement. “We’re both profit to member funds, put our members first and believe in the importance of financial advice to help our members make the most of their retirement savings, while also sharing members from similar industries.”
Both funds invest the retirement assets of teachers, nurses, and community-service workers in Victoria and New South Wales.
This builds on the consolidation trend in Australia’s pension industry. Underperforming funds are under more intense scrutiny by the nation’s government, leading to new laws that call on boards to consider the best interests of plan members. One option is for some organizations to cut their losses and build a bigger, and presumably better, institution. These moves are also cost-effective for the asset owners.
Last month, Sunsuper and AustSafe Super completed a merger that not only turned the new fund into a A$64 billion juggernaut but will also save about A$10 million annually for its members.
“The opportunity to achieve greater scale through a merger like this could help us create even better member outcomes through enhanced services and broader investment opportunities delivering sustainable investment returns,” said VicSuper, adding that nothing has changed and neither fund has yet made a decision considering there is “no obligation to proceed.”
Deanne Stewart, the First State Super’s chief executive officer, could not be reached for comment
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