AMP, Plum and BT in frame on corporate super mandates

An almost unprecedented number of corporate superannuation mandates are up for grabs with the likelihood that more than half of them will end up migrating to industry superannuation funds.

According to consultants specialising in handling corporate superannuation mandates, around nine reviews are currently underway for corporate superannuation funds currently being serviced by the National Australia Bank-owned Plum, AMP Limited and Westpac’s BT.

The upturn in corporate superannuation fund mandate reviews has been caused by the backlog generated by the 2020 COVID-19 lockdown which prompted corporate superannuation boards to put their plans on hold.

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“The boards of these corporate funds were thinking about reviewing their providers 12 months ago but have only recently decided to activate the process,” one consultant said.

At the same time, at least some decisions to review have been prompted by National Australia Bank’s decision to sell its MLC Wealth business to IOOF, including its superannuation business, Plum.

AMP Limited has been the subject of scrutiny with respect to corporate superannuation mandates in the wake of fall-out from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and as a recently as late last month acknowledged the “exit” of a corporate super mandate as being a factor in its cash outflows.

The company valued its corporate superannuation assets under management at $28,361 million and used its full-year investor report to state that the 2020 financial year had been impacted by previously announced mandate losses in corporate super amounting to $1.8 billion and $1.8 billion of COVID-19 Early Release Super payments.

One of the superannuation industry’s most experienced consultants, Deloitte’s Russell Mason confirmed the likelihood that a significant number of the corporate funds would select industry funds to meet their needs.

“Ten or so years ago corporate superannuation boards might have ruled out a move to industry funds, but that is no longer the case,” he said.

“Where a decision is being made, industry funds are getting 50% or more of the mandates,” Mason said.

Mercer’s Brian Zanker confirmed the level of activity in the corporate superannuation space and said there was significant attention being directed towards movement generated by recent announcements and transactions.

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The service offered by the Retail funds is generally so poor. Their relationship managers are generally useless, with a few notable exceptions. From our experience with recent tenders and reviews, 100% are moving to Industry Funds. The retail funds have lost any competitive advantage, and most of their good staff.

BT were never that huge in the corporate super market, AMP and Plum definitely are. Certain industry funds, primarily SunSuper, (and I don't think SunSuper like being called an "industry fund") have probably the best offer for the corporate super market, but most industry funds are too inflexible for the larger corporate plans (can't do defined benefits, only one choice of insurer, lack of insurance offers per employer category, small investment menu, etc.). It will be interesting to see where corporate plans end up, but 100% won't go to industry funds due to their inflexible offering and in most cases, poor member and employer services. Mercers seems to be winning a few recently as well.

If you think retail funds have lost their competitive advantage, they may be in decline, but in many areas still trump industry funds. One are industry funds really lack is member services (administration outsourced) and employer services. the superannuation consultants know this, and the employers/trustee boards making the decision won't want the executives in the company getting multiple complaints of errors from parroll and HR staff, let alone poor experience from senior members.

Interesting times..

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