AUSTRALIA - Corporate and public sector funds were still a thriving part of the superannuation market despite many mergers and transferrals to retail outfits, according to Watson Wyatt.
The investment consultants cited a recent survey by the Australian Prudential Regulation Authority (APRA) showing there to be 101 of these funds with at least AUS$100m in assets.
Andrew Boal, managing director, Watson Wyatt, Australia, commented: “Many corporate funds have achieved their own scale advantages and any cost savings in moving to alternative arrangements are immaterial in the scheme of things.”
Boal continued: “Indeed at this larger end of the market, other issues – like better plan governance and the potential for resultant higher returns – can have a more sizeable impact than a few basis points saving in administration fees.”
APRA figures showed since 1996, almost 90% of corporate and public sector funds had either merged or transferred to retail or industry funds. These remaining “stand alone” funds have continued to account for 25% of superannuation funds in Australia.
Boal pointed out, however that many large funds absorbed into retail outfits had remained a separate sub-fund within another vehicle.
He added that due to increased legislation for companies and high liabilities in their pension funds, employers wanted to retain a certain control over investing their assets.
Boal concluded: “At the end of the day, poor decision in any if these key areas will affect the livelihood of their employees and ultimately their brand as an employer of choice in the prevailing tight labour market.”
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