Qantas Super Explores 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.

The Trustee regularly reviews its strategy for Qantas Super to ensure the fund is positioned to deliver great financial outcomes for members. Before arriving at the decision to explore merger options, the Trustee received independent specialist advice. The Trustee believes it is important to explore merger options 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 the fund down this path. Therefore, with future regulatory, competitive and sustainability pressures in mind, the Trustee has decided to explore merger options now.

Yes. Over the past two decades the $3.5 trillion superannuation industry has been steadily consolidating into a smaller number of larger superannuation funds. The average size of mergers in recent times was significantly larger than the average fund mergers over the previous decade. For instance, the average size of the receiving fund (the fund that continues after the merger) was $76 billion in FY20/21, which is up from $32 billion in 2017–2019.

When the Superannuation Guarantee (SG) was first introduced in 1993, there were more than 4,000 stand-alone corporate superannuation funds. In 2004 there were 761 corporate superannuation funds, a decade ago there were less than 50, and as at June 2022 there were only 11 corporate funds remaining. Qantas Super is one of the only three large corporate superannuation funds who have not announced their intention to merge.

¹ “Annual fund-level superannuation statistics back series June 2004 to June 2022”, APRA, published 14 December 2022.

There are numerous drivers for the reduction in the number of superannuation funds over time. Chief among them are:

• Over time the superannuation industry has become more competitive and focused on improving member outcomes. One way to achieve this is through achieving and leveraging economies of scale.
• Superannuation funds are operating in an increasingly complex environment and need greater human, financial and technical resources to invest in products and services for members as well as manage risk.
• As the superannuation fund industry has grown in assets under management and economic significance, the legislative and regulatory requirements placed on them has substantially increased.

Regulators and industry experts expect more funds to merge in the future.

A potential merger will create an opportunity for greater scale, cost efficiencies and improved sustainability, which are expected to result in enhanced products, services, and outcomes over time. The Trustee is exploring merger options now because it thinks this will be in members best financial interests to do so. For example, merging into another super fund can pass on the benefits of greater scale via lower fees and costs.

Our primary focus is always the best financial interests of our members. If a superannuation fund merger were to occur in the future:

• Members in defined benefit (DB) divisions of Qantas Super would have their superannuation interests transferred from Qantas Super to the new fund with equivalent rights to benefits that they currently have. DB members would transfer to the new fund and their employer would continue to support and fund their benefits in the new fund.
• Members in accumulation divisions of Qantas Super would have their superannuation balances transferred to the new fund. Accumulation members would transfer to the new fund and their employer would pay superannuation contributions for these members into the new fund.

We would also seek to improve member services and lower fees and costs.

Importantly, your employers’ obligations to provide superannuation benefits to members would remain the same.

A Successor Fund Transfer, or SFT, is the most common way for one superannuation fund to merge with another superannuation fund. The requirements for an SFT are set out in legislation. The key requirement for an SFT is the agreement between the transferring trustee and the receiving trustee that the successor superannuation fund will confer on the members equivalent rights to those rights the members had in the transferring superannuation fund in respect of their benefits. In addition, the accrued benefits of members cannot be adversely altered as a result of an SFT.

Qantas Super is a not-for-profit superannuation fund that is regulated by the Australian Prudential Regulation Authority (APRA). The superannuation funds are held in trust for our members and are held separately from any Qantas Group assets. If a merger were to occur, it is anticipated that this will involve the transfer of all Qantas Super fund assets and liabilities to the Successor Fund. This will include any surplus that remains after benefit transfers and the payment of all final liabilities, costs and taxes of the fund. A surplus arises when the value of a super fund’s assets exceeds the amount estimated to be required to meet all future benefit payments.

No. Qantas Super will continue to operate as normal with no changes to members’ defined benefit, defined contribution or income accounts as a result of this process. That said, as we do each year, we will look for opportunities to improve products and services or lower fees and costs if we are able to do so.

There is no change to the insurance arrangements in Qantas Super because of this decision. If Qantas Super were to merge with another superannuation fund, we would seek similar insurance arrangements.

If Qantas Super were to merge with another superannuation fund, at the date of transfer, your investment option(s) would be mapped to the most equivalent investment option(s) in the new superannuation fund. After that, you would have the flexibility to be able to choose different investment option(s) from the menu available in the new superannuation fund.

There will be no change to your Qantas Super income account during this process. Should we merge with another superannuation fund, your pension account will be transferred to that new superannuation fund.

There are no changes to Qantas Super fees and costs as a result of this decision. If Qantas Super were to merge with another superannuation fund, we would seek to achieve similar or better fees and costs arrangements for members.

No, there’s nothing you need to do now. The Trustee is committed to keeping members informed at each stage of this process. Members will be provided with comprehensive communications and will be invited to attend seminars/webinars.

No. There is no need to do anything at this stage as the Trustee explores merger options.

Yes. You will still have access to help and advice through our various channels, including our Member Hub at Mascot Campus. You can book a session directly on www.qantassuper.com.au/help/advice.

Yes. Our friendly helpline team are here to help you. Give them a call on 1300 362 967 weekdays from 8am – 7pm AEST / AEDT. If you’re overseas dial +61 3 8687 1866.