Companies Taking Extra Precautions to Ensure Survival of Corporate Super Funds

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Corporate super funds operating independently need help to maintain their viability as their membership decreases, resulting in reduced inflows.

The Commonwealth Bank Group Super announced last month that it would merge with the Australian Retirement Trust (ART), which the Australia Post super fund preceded.

According to APRA’s data, the number of super corporate funds reduced significantly from 143 to 24 between 2008 and 2018, representing the highest decline among all the funds it regulates. Although further consolidation is anticipated, to what extent can this specific market sector continue to decrease in size?

“It is anticipated that only a few corporate funds will be left in the next few years. There may be a couple of defined benefit or employer-controlled funds that are not outsourced to another fund,” said Ian Fryer, the general manager at Chant West.

A recent study by The Conexus Institute found that corporate funds generally need to meet the $30 billion AUM threshold. APRA believes it is necessary to compete effectively with more significant funds. In addition, many of these funds are contracting due to a need for more effort in seeking out new members.

According to APRA data, TelstraSuper had $24 billion in assets under management by the end 

of the 2022 financial year and is the closest to APRA’s minimum requirement of $30 billion. The fund had a net inflow growth rate of -1.4%. 

The corporate fund of Commonwealth Bank of Australia, with $12.4 billion in AUM, experienced a growth rate of -8% in inflow, while Qantas Super, with $8.5 billion in AUM, suffered a growth rate of -5.7%.

As super corporate funds face intense pressure to remain viable, companies are taking extra precautions to ensure the survival of these critical retirement vehicles. This means employers must proactively recruit new members and manage their fund’s assets.

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