An update on exploring merger options

We understand that it may not be obvious to members why Qantas Super should explore merger options. After all, we’re a top performing super fund, with products that are Gold and Platinum rated by an independent ratings agency. However, it’s the Trustee’s job to not only look at what’s going well today, but also to recognise what could be better, to look forward to how Qantas Super will likely fare in the future, and to consider the different strategic pathways available.

Having recently considered all of these issues, and taken on‑board specialist independent advice, the Trustee Board concluded that it would be in members best financial interests to explore options to merge Qantas Super with another super fund. Why? There are three key issues:

• Competition: For many years the super industry has been consolidating into a smaller number of ever larger super funds. In fact, in 2004 there were 761 corporate superannuation funds and as of June 2022 there were just 11 corporate funds remaining. The largest super funds now have memberships and assets under management that are many, many multiples of Qantas Super. While size isn’t everything, economies of scale are important, and they provide these larger funds with opportunities to make significant investments in their products, services and member experiences as well as drive down costs per member.
• Legislation/regulation: As the super industry has grown, the legislative and regulatory requirements placed on super funds have substantially increased. These changes usually make a lot of sense, as we all want a better run and more secure super system. However, some of these changes also hurt super funds like Qantas Super. A great example is a recent change in how superannuation guarantee contributions are treated if new employees don’t make an explicit super fund choice. The intent of the change was to reduce the likelihood of people unintentionally having multiple super accounts – a worthy goal – however one of the side effects of this change is that Qantas Super will not grow its new membership as much as previously expected.
• Sustainability: Like any member-driven organisation, we need to be confident that we can sustainably deliver for our members now and in the future. Due to a host of factors, as we project forward, Qantas Super looks like it will be less sustainable in the future than it is today and has been in the past. For example, the following factors have been important considerations; larger super funds deal with thousands of employer groups and we only deal with one, COVID‑19 dramatically changed the demographics of Qantas Super’s membership, legislative changes mean Qantas Super will likely grow less than planned etc. As such we think our members would likely be better served by being part of a larger super fund with a broader membership and a healthier cash flow profile.

Taking all of the above factors and others into consideration, after lengthy deliberation the Trustee Board concluded that it would be best to explore merger options now, when Qantas Super is well positioned to do so (i.e. with competitive investment performance, products and services provided to members), rather than wait until circumstances might force us down this path in the future.

Qantas Super is not being sold.

If the process of exploring merger options leads to a merger down the track, it would most likely occur through a process called a Successor Fund Transfer (SFT). An SFT is a transfer of members and their benefits from one superannuation fund to another, and the requirements to perform an SFT are set out in superannuation legislation. As an SFT does not require individual members to consent to the transfer there are onerous legal requirements involved that must be met by the trustees of both the transferring super fund and the receiving super fund. The key requirement for an SFT is the agreement between the transferring trustee and the receiving trustee that the successor super fund will confer on the members equivalent rights to those rights the members had in the transferring superannuation fund. In addition, the accrued benefits of members cannot be adversely altered as a result of an SFT.

No, the Qantas Group and its management did not make or force this decision.

The decision to explore merger options was made by the Trustee Board, which oversees and governs Qantas Super, on the basis that it is in the best financial interests of members to do so. The Trustee Board is comprised of an equal number of Company-appointed and Member-elected Directors and the decision to explore merger options was a unanimous decision of the Board.

Importantly, if an SFT were to occur in the future, your employers’ obligations to provide superannuation benefits to members would remain the same. This means that, for defined benefit members, their employer would continue to support and fund their benefits in the new fund. Any accumulation members would also have their employer pay superannuation contributions into the new fund.

No, members will not lose their defined benefit entitlements.

If the process of exploring merger options leads to a merger, one of the key requirements of an SFT is that the successor fund will provide equivalent rights to benefits that members held in their original fund. This means that Qantas Super members who are in defined benefit divisions now would have their super interests transferred to the receiving super fund with equivalent rights to the benefits they currently have.

No, members are not able to vote on merger proposals.

Superannuation legislation requires that super fund trustees are the ones who must consider, and if appropriate, approve any SFT proposals to merge one super fund into another. As an SFT does not require individual members to consent to the transfer there are rigorous legal requirements involved that must be met by the trustees of both the transferring super fund and the receiving super fund.