The funds announced on Tuesday they had entered a ‘Memorandum of Understanding’, meaning they have entered into formal discussions to consider a merger but have not yet signed a binding contract. In other words, a lot more checks and balances need to occur before a merger officially goes ahead.
Spokespeople from both funds said the potential merger would go ahead if it was in the “best interests” of members.
“This merger can provide greater scale for both funds and has the potential to deliver cost savings to members across trustee services, administration and investments, while also providing members with better services, solid long-term investment returns and improved financial outcomes at retirement,” TWUSUPER CEO Frank Sandy said.
On the EISS side, CEO Alexander Hutchison noted that while it was still “early days”, the prospect of a merger looked promising, with “a lot of potential benefits for members”.
The potential merger is part of a broader trend sparked by calls from industry regulator, the Australian Prudential Regulation Authority (APRA), for super funds to reduce complexity for members and eliminate underperformance, including by merging if this was in the “best interests” of members. The regulator was given stronger powers to take action against the trustees of underperforming funds in early 2019, following recommendations made in the banking royal commission.
Sunsuper and QSuper are among recent funds to have agreed to merge, with their new merged super fund set to launch in September if the deal passes regulatory, legislative and final board approvals.
EISS Super is an industry super fund with more than 22,000 members and over $6 billion in retirement savings. It was originally created for workers in the NSW energy industry, but says it is now open to everyone.
TWUSUPER is also an industry super fund with $6 billion in funds under management, with some 100,000 members working in the road, aviation, bus, waste and recycling-affiliated industries.
At this stage it is unclear if TWUSUPER members will retain their access to special discounts and rates from ME Bank, or whether these will be made available to current EISS members following a merger. ME is currently owned by 26 industry super funds, including TWUSUPER, but has been purchased by Bank of Queensland.