Australian pension funds VicSuper and First State Super have advanced their proposed merger by signing a binding heads of agreement to create one of the largest superannuation and advice businesses in the country.
The combination of VicSuper and First State Super is expected to manage more than AUD120bn (£67.11bn) in savings for more than 1.1 million Australians.
The two funds announced joint discussions earlier this year to explore the benefits that their merger would bring. Financial terms of the merger have not been disclosed yet.
The merger between is expected to give an opportunity to consolidate the shared heritage, values and strengths of the strongly aligned profit-to-member super funds to pave way for new market leadership and innovation, said the parties in a joint statement.
First State Super CEO Deanne Stewart said: “We have a lot in common with VicSuper. We both have a member-first culture and a heritage in the public sector, and we both believe quality financial advice can help our members make the most of their retirement savings.”
The binding heads of agreement signed by the parties is subject to due diligence. The two funds, in the coming months, will carry out a detailed review of each other’s operations and look into multiple operating models apart from discussing how best to leverage the potential combined investment scale for even better outcomes for their members.
The proposed merger is expected to be completed in mid-2020 with the enlarged fund to be led by Deanne Stewart, the current CEO of First State Super.
According to the funds, their merger will scale benefits to help the retirement savings of their members over the long term. The merger will also result in wider investment market opportunities and increased diversification, which could then bring down costs and enhance outcomes for members.
Furthermore, the combination of the retirement assets of the two parties is expected to give opportunities to create innovative and potentially market-leading retirement income solutions for their members.
VicSuper CEO Michael Dundon said: “Our conversations with First State Super have clearly indicated that a merger between our two Funds has the potential to offer significant benefits to members, and it’s with their interests in mind that we look to this next phase in our merger discussions.”