Shell Australia is poised to become the latest Australian corporation to outsource its retirement plan to an external superannuation fund provider.
Executives are likely to select a new provider within the next week or so for the A$700 million (US$730 million) Shell Australia Superannuation Fund, according to industry veterans, who declined to be named.
Paul Zennaro, a spokesman for Shell Australia, declined to comment.
The move by Shell, Melbourne, is the latest step in an ongoing trend that has corporate funds — which had more than 15% of total superannuation industry assets in 1996 — accounting for a 3.8% sliver of the superannuation pie, A$58 billion, at the end of last year.
Shell informed plan participants in November that company officials had decided to outsource the fund because of rising regulatory costs.
Industry veterans predict the latest spate of changes in regulatory guidelines will ensure that Shell won't be the last company to do so.
The number of superannuation plans offered by companies to their own employees has plunged to roughly 100 now from more than 4,000 in 1996.
While many of those 100 already outsource the investment of their superannuation funds to firms such as Mercer or Russell Investments, they remain sponsors and fiduciaries. By contrast, “what Shell is doing is closing down their entire fund, and moving (it) into a commercial master trust or industry fund,” noted one veteran investment consultant, who declined to be named.
Regulatory reforms this year requiring superannuation fund sponsors to offer participants new, standardized, low-fee default options and to upgrade their back-office functions are the latest in a series of “threshold moments” in the Australian superannuation industry's more than 20-year history, said Timothy Jenkins, a senior partner and representative, Mercer Consulting (Australia) Pty Ltd., Melbourne.
Providers will have to ask, “Am I still in this or am I not?” he said. The answer for many will be “no,” said Mr. Jenkins, who also serves as Mercer's retirement and investments business leader, growth markets. He predicted the universe of corporate superannuation funds will likely narrow to fewer than 50 in the coming year or two.