APRA signals more fund consolidation

Having been a primary catalyst for superannuation fund consolidation over the past two decades, the Australian Prudential Regulation Authority (APRA) has signalled that the industry should expect more consolidation in the near future.

APRA member, Helen Rowell has told a Sydney forum this week the regulator is expecting a continuation of industry consolidation and that trustees should be prepared for this reality.

Discussing the regulatory and other changes impacting superannuation funds, Rowell said that some trustees were clearly positioning themselves for the future and responding proactively to the challenges that they saw ahead, but this was not universally the case.

"Some trustees may feel they need more clarity in some areas and will respond appropriately in due course – hopefully sooner rather than later. Others may decide that they are unlikely to have the resources and capabilities that will be needed to deliver value for their members into the future, and seek to merge or wind-up the funds under their oversight," she said.

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Rowell said APRA therefore expected there would be a continuation of the industry consolidation trend and noted the degree to which the industry had shrunk since 2004 when the number of funds reduced from over 1900 to around 350 in June 2014.

"It reduced further, to about 330, by December 2014," she noted.

Rowell said the consolidation had been particularly noticeable in the corporate fund segment, where the number of registrable superannuation entities had declined from over 1400 to less than 100 in the last 10 years.

"APRA's focus in the coming months will remain on ensuring that all trustees are proactively considering their future strategy and putting in place concrete plans to address the issues ahead," she said.

"In some cases, this may mean planning for (a hopefully graceful) exit from the industry."