Scale and Competition in Australian Superannuation

Abstract

Using official data and new econometric models based on how the industry actually works, we show the benefits of scale for members are limited, and confined to the non-profit sector which is structured to incur relatively low fixed costs compared with much higher variable costs. In Australian institutional superannuation, most efficiency gains, such as those from economies of scale, are captured as profits for financial intermediaries, with little benefit for members. Recent regulatory reforms on fee disclosure and scale requirements have the unintended consequences of further reducing competition and benefiting the large financial conglomerates.