Better together: Super funds set to merge

NGS Super is getting ready to join forces with Australian Catholic Super. NGS Chief Executive Officer Laura Wright talks to IEU journalist Monica Crouch about why, and what it means for members.

When NGS Super unites with Australian Catholic Super in late 2021 or early 2022, the consolidated fund will have some $21 billion in funds under management and more than 200,000 members. Of this, NGS will bring about 113,000 members and $11.5 billion, while ACS comes with 85,000 members and about $9.5 billion.

“It’s about the future,” said NGS CEO Laura Wright. “The board really wants to maintain a strong independent and Catholic schools sector fund, and to do that we need to get bigger.”

The combined entity, comprising two ‘like-minded’ funds, will also retain its focus on the independent education community.

“We know teachers, we know the people working in the schools, we know what they like,” Wright said. “Our personal service, particularly in the workplace, is something we really value and our members value. And to maintain that focus going forward we need more members – a larger base to keep our costs low.”

The Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and the Federal Government are strongly urging mergers in Australia’s $2.9 trillion super sector. The industry has grown crowded, highly competitive and overly complex, enabling underperforming funds to proliferate and discourage members from engaging with their investments. Mergers are intended not only to stabilise any listing ships but also to reduce overall fees charged to members.

Abundant upside

The union of NGS with ACS brings several blessings. “The immediate benefit will be a reduction in investment fees,” Wright said. “We found that just over a year ago when we merged with QIEC Super, a similar fund in Queensland, there was an immediate reduction in investment fees across the investment options.”

It works like this: every business has considerable fixed costs (for example, rent, salaries, utilities, fleet, regulator levies), so when these costs are spread across a larger membership, the cost to each individual member is reduced. And once NGS and ACS are no longer competing for members in the same sector, some marketing and servicing expenses will also decrease.

There are longer term benefits, too. “With the additional funds under management, we’ll certainly have more investment opportunities outside of the mainstream,” Wright said. “We’ll have opportunities to structure investments to make sure they’re cost-effective, which of course has a bottom-line effect on the returns.”

Another upside, Wright says, is bringing the best products and services from both funds together under one roof. Then there’s that all-important personal service. “We’re always prepared to spend time with members in schools,” she said.

Good marriage material

In many ways, it’s a match made in heaven. “These two funds have been like mirror-image of each other for 30 years,” Wright said. “We’ve coexisted in the same schools, with the same employers, and in some cases the same members – we have about 5000 dual members – so we have a lot in common. We’ve got the same organisational values and there are some similar products and services.”

To maintain a strong independent and Catholic schools sector super fund, we need to get bigger.

That said, the two funds are not rushing down the aisle. “Because we’re both reasonably sized organisations – NGS has 72 staff, ACS has about 120 – so we have to bring two distinct organisations and two lots of offices together, and this takes time to plan,” Wright said.

“We’re also working out what’s the best mix of products and services and making sure we have them in place if not on the day of the merger then a planned process of unveiling them.”

IEUA NSW/ACT Secretary Mark Northam agrees. “It’s a significant step, a logical step, and one that is being taken very carefully,” he said.

“The IEU will remain in close contact with NGS as the transition arrangements firm up.”

Governance going forward

Both funds bring a wealth of executive experience to the table. A founding director of NGS in 1988, Wright has since had 12 years in senior roles at the fund, including six on the board and two as chair. She became CEO in 2018. ACS chief Greg Cantor has been with ACS for equally as long, having been appointed in 1989. Cantor, who has also been a director of NGS for a decade, will head up the merged fund, and Wright will become Deputy CEO.

There will be 12 directors on the new board: six from NGS and six from ACS. Each will have three employer representatives and three member representatives.

The NGS employer reps will come from the independent school sector, nominated by the Association of Independent Schools (two from NSW and one from SA); the member reps will be nominated by the union (one from Queensland, one from NSW and one from SA).

ACS will contribute three employer directors (one from Queensland, NSW and WA), nominated by Catholic Education, and three members from their member elect group.

Sustainably strong

Sustainable investment will be a top priority for the merged fund. “Both funds are very committed to embedding environmental, social and governance principles into the merged entity’s investment process,” Wright said.

“In the larger fund we’ll have greater capacity to make sure we’re making money in a way that’s adding value to people and to the world – making the world a better place.”

Our members working in schools have a strong commitment to the future. I would say that’s one of the great attractions of being a teacher, is it’s about the future, and that’s why I think it’s played out in investments because we know our members are very concerned about these issues, and we responded accordingly, because we believe that investing sustainably and for good actually will improve returns to members. It’s better to be investing money to make the world a better place if you can.

Union influence

Wright welcomes the IEU’s presence in the new fund. “As a founding parent of NGS, the IEU in NSW has always had a great impact on the direction the fund has taken,” she said. “A lot of NGS members are also union members, and there are great synergies there.”

Wright notes that NGS is the size it is today because the IEU astutely supported other mergers. “We’ve got 113,000 members now because we’ve had five mergers to get us here – now we’re going to double in size,” she said.

“And we’re about to enter a very exciting period in the history of super for independent and Catholic schools.”

From the Chair: Dick Shearman

NGS Chair Dick Shearman addressed the IEU's AGM on Saturday 24 October: “This merger is not only a good thing, it’s one of the most positive things we’ve done over the decades we’ve been involved in superannuation in our sector,” Shearman said.

Shearman gave three key reasons the NGS merger with Australian Catholic Super is a good move. “One, it’s an industry fund,” he said. “Two, ACS is in the same workplaces as us. And three, by merging with ACS, we can maintain our identity in a way we couldn’t if we went into one of the bigger funds.”

There’s one more key benefit: nation building. “The big super funds have an influence on our economy by virtue of their size,” Shearman said. “But the Liberal Party wants to break the nexus between unions and industry funds. There are culture wars going on in the Coalition, based on what they consider to be outrageous claims that superannuation funds can contribute to nation building. They think super funds have nothing to do with nation building, that it’s for them and their mates to decide what infrastructure should be invested in or clean energy versus coal.”

The bigger the industry fund, he said, the more power it has to make meaningful investment decisions.

Shearman is upbeat about the future. “The merged fund will be stronger and more competitive, with one union and one fund across all the workplaces the IEU covers,” he said.