Western Australia is set to lose one of its few retail financial services players with a move by $3.4 billion superannuation player Westscheme to merge with its giant eastern cousin Australian Super to create a $40 billion industry fund.
Western Australia is set to lose one of its few retail financial services players with a move by $3.4 billion superannuation player Westscheme to merge with its giant eastern cousin Australian Super to create a $40 billion industry fund.
Western Australia is set to lose one of its few retail financial services players with a move by $3.4 billion superannuation player Westscheme to merge with its giant eastern cousin Australian Super to create a $40 billion industry fund.
Westscheme’s CEO Howard Rosario said the impetus for the merger was not performance-related but a view taken by the board of the fund’s trustee that delivering cost-effective services to members was becoming increasingly difficult for a fund of its size.
The move is being heralded as the first of a series of expected mergers as the diverse superannuation sector rationalises under pressure from regulators, government and economic forces.
There is clearly plenty of room for this. The merged funds – with a combined 1.7 million members – would represent about 3 per cent of the Australian superannuation sector’s assets.
Both are part of the industry fund sector which has suffered badly in terms of performance as a result of belated impact of global financial crisis on their favoured infrastructure investments. Westscheme went as far as closing its Target Return option to new business as a result of the difficulty in meeting objectives once viewed as relatively simple in the pre-GFC environment.
Mr Rosario cited the impact of the GFC and mooted changes in the shape of the industry outlined by Jeremy Cooper in his review of superannuation for the federal government as factors that had prompted the board to seek a merger partner.
He said the alternative was to wait and risk future regulatory action that could force a merger on terms that were out of Westscheme’s control.
Under the terms of the merger which takes place on July 1 this year, the Perth-based funds and employees will be merged into AusSuper, which will retain a WA operation under the guise of a co-branded Westscheme division.
However, Westscheme has no right to a board position on AusSuper as a result of the deal. Instead AusSuper CEO Ian Silk said his fund was committed to having a WA representative on its board.
Westscheme’s current board is composed of equal numbers of members from the WA Chamber of Commerce and Industry and the union movement, with an independent chair.
The only other major superannuation fund based in WA is the state-owned GESB which is more than three times the size of Westscheme, but remains a minnow in national terms.
In other local superannuation industry news, the state government has announced the retirement of GESB chairman Phil Harvey next month after eight years in the job.