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Research released by Deloitte adds “logical impetus” to the Government’s desire for the rationalisation of super funds into fewer and larger entities.
Deloitte Actuaries & Consultants superannuation partner Wayne Walker said a review of 60 industry funds found large superannuation funds have a definite cost advantage over smaller funds.
Walker said the difference in performance is statistically and financially significant. The review looked at both cost structures within the funds as well as returns on default options and found, on average, smaller funds weren’t able to generate returns high enough to offset their higher costs. But this wasn’t just a cost issue, Walker said, with large funds also delivering better investment performance to members using the default option.
The combined impact of lower costs with higher returns achieved by large funds could increase a person’s retirement benefit by almost 25 per cent over a working lifetime.
But this was not a death sentence for smaller funds, Walker said, with some well performing small funds bucking the trend. For those that did not, strategic partnerships with better scaled service providers or other funds may be the key to improving returns and retaining members.
