SYDNEY (Reuters) - First State Super and VicSuper said on Tuesday they have signed a binding deal to merge, creating Australia’s second-largest pension fund as regulatory pressure drives consolidation.
The new superannuation, or retirement, fund would have about A$120 billion ($84.3 billion) in assets under management servicing over 1.1 million workers, the nonprofit funds said in a joint statement.
AustralianSuper is the largest, managing about A$160 billion.
A merger was a “proactive step for the two funds, and one that’s very much aligned with the growing trend of consolidation across the superannuation industry,” the funds said in a statement.
First State Super’s current chair, Neil Cochrane, and current Chief Executive Officer Deanne Stewart, would be appointed top executives of the merged fund, according to the statement.
The funds had disclosed they were in merger talks earlier this year.
A public inquiry last year found that large fees charged by some fund managers within Australia’s compulsory A$2.7 trillion pension system were eroding workers’ savings, and that many were not putting customers’ interests ahead of their own.
In the aftermath of the inquiry, the regulator has promised to step up scrutiny and push serious underperformers out of the industry.
Wayne Byres, chairman of the Australian Prudential Regulation Authority (APRA), said last week the “persistent push” to lift prudential standards had contributed to consolidation.
“I’m quite confident that we’ll see potentially a lot more exits from the sector over the next little while,” he added.
First Super and VicSuper said the signed heads of agreement would follow a period of due diligence, and expected to complete the merger with one single board of directors by June 30, 2020.
Reporting by Paulina Duran; Editing by Stephen Coates