Members must be at heart of merger decisions

The Royal Commission’s final report has reinforced that members’ best interests must be the determining factor in any considerations of superannuation fund mergers, after more than one fund in the last year has faced criticism over decisions not to merge.

“The determining question cannot be whether one or more of those who are directors before the merger will have a place on the new board,” Royal Commissioner Kenneth Hayne wrote.

He pointed to the case studies considered during the Commission as showing some recurring issues arising in this regard when possible mergers were considered by funds.

“In particular, the evidence pointed to processes related to board composition of the merged funds as being important to the success or failure of some merger proposals,” the report said.

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“Likewise, care must be taken when considering whether proposals about board nomination and selection procedures for the board of the new entity are assessed according to the interests of members, or the interests of shareholders or nominating organisations of the merging trustees.”

Hayne reinforced that trustees of registrable superannuation entities (RSEs) offering MySuper products must determine annually whether the fund has sufficient scale to ensure that the financial interests of beneficiaries weren’t disadvantaged relative to those in other RSEs’ MySuper products, and that such a scale assessment should invite attention to the question of mergers.