Two of Australia's biggest pension funds are exploring a merger that would create a retirement-savings giant with more than A$110 billion ($78 billion) in assets under management.
First State Super and VicSuper signed a non-binding memorandum of understanding and believe a merger could "deliver significant benefits to members," according to a statement Thursday. A recommendation to the pair's respective boards is expected about midyear.
Consolidation in Australia's A$2.8 trillion pension industry is gathering pace amid growing scrutiny of underperforming funds following a searing inquiry into the nation's financial services sector and new laws that require boards to consider the best interests of members. KPMG sees the number of super funds that are regulated by the Australian Prudential Regulation Authority halving in the next decade.
A merger between Sunsuper and AustSafe Super was completed earlier this month, and Sunsuper CEO Scott Hartley said in March there are "lots of discussions." Its tie-up with AustSafe was the second after a similar deal with Kinetic Super in 2017.
VicSuper and First State Super invest money for teachers, nurses and community service workers in the eastern Australian states of Victoria and New South Wales. Combined, they would become the nation's second largest non-profit super fund, managing retirement savings for more than 1.1 million members.
First State Super CEO Deanne Stewart said that initial discussions had indicated a strong cultural alignment between the two. "We both have a member-first culture and a heritage in the public sector," she said in Thursday's statement. "Importantly, we believe quality financial advice can help our members make the most of their retirement savings."