Virgin Super’s $540 million superannuation portfolio has been rolled into superannuation consultancy Mercer’s $21 billion super trust with the completion of a merger arrangement that sees Virgin Super retain its branding.
But all other functions of the operation, including the trusteeship, asset management and administration have been handed over to to Mercer. About half Virgin’s fund’s members are in the default MySuper option, while the remainder are in member choice investment investment options.
The deal will deliver Virgin Super’s 20,000 members a substantial fee reduction. A Virgin Super member with a $50,000 account balance will see their total fee bill drop to $333 a year from $553, the Australian Financial Review has reported.
Chris Sozou, general manager of wealth and insurance at Virgin Money, denied the merger was the result of pressure from the Australian Prudential Regulation Authority but conceded that Virgin Super was not offering members value for money.
News of the Virgin deal comes just two weeks after Mercer trumped the desires of Link to grab control of the NSW government owned Pillar super administration group for $35 million.
Mercer, has been chasing expansion in the Australian market. It is targeting consolidation possibilities with small industry, retail and public sector funds that are suffering without access to economies of scale in areas like asset management, administration, data analytics and member communications.
“Our strategy is to think about partnerships. Small funds will be thinking about their future. We’d be hopeful of adding partnerships and alliances,” Ben Walsh, Mercer’s Pacific managing director managing director said.
“Virgin Money Super is about helping our customers retire comfortably and look forward to a bigger future. This partnership provides our customers with access to a market-leading superannuation offering, which meets our commitment to delivering low-cost, high-value financial solutions,” said Greg Boyle, chief executive of Virgin Money Australia.
He said he hoped that under the management of Mercer, total Virgin Super assets would grow to exceed $1 billion.
“Partnering with one of the world’s most iconic brands allows both Mercer and Virgin Money to leverage the best capabilities from each organisation,” said Mercer’s financial services business leader Andrew Godfrey.
“It also provides a new opportunity for significant growth in Mercer’s superannuation business, opening up a direct to consumer offering and the potential for us to service the micro, and small-to-medium employer markets.”
Mr Godfrey said the deal “represents a strategic expansion for the future of Mercers’ wealth business”, adding that the two businesses could now jointly market Virgin Money Super.
Virgin Super has been outsourcing its administration to Mercer since December last year.