Super outsourcing saves 25%: Heron

Publication Date: 23 January 2004
Publication:: Investor Weekly
Journalist:: Michael Bailey

Employers can reduce their superannuation costs by an average of 25 per cent by outsourcing to a master trust or industry fund, according to research from super consultant The Heron Partnership.

The firm also estimated $10 billion would move from corporate funds to master trusts or industry funds in 2004 alone.

The research is based on recent examples of Heron's own work for medium-to-small employers, and takes into account the total costs being incurred by corporate funds, such as administration charges, consulting fees, APRA levies, audit costs, insurance costs and asset manager expense ratios, compared with what would be charged by a typical master trust or industry fund.

Savings of up to 57 per cent were identified for an employer of 500 superannuates with $25 million under management, as illustrated in the table.

These savings, as well as the usually superior investment choices and internet access available through outsourcing providers, would see the trend of corporate fund closures "continue unabated", according to Heron Partnership managing director, Chris Butler. He predicted that in five years, only 200 corporate funds would survive from the 2000 in operation today.