AvSuper announces MOU with Commonwealth Superannuation Corporation (CSC)

04/05/2022

AvSuper has signed a Memorandum of Understanding (MOU) with CSC, which means that both funds will now commence due diligence on each other to determine if a merger is in the best interest of members of both funds.

Both AvSuper and CSC are committed to ‘serving those who serve’. CSC has a 100-year history of providing superannuation services to current and former Australian Government employees and Australian Defence Force employees and veterans.  AvSuper was formed in 1990 for employees in the Public Service and working for the then Civil Aviation Authority.

As well as sharing a similar heritage, AvSuper members will benefit from CSC’s $60 billion scale in investments.

More operationally,  both organisations have strong defined benefit capability, both currently partner with Mercer Administration Services for provision of customer service and administration services, and both organisations partner with AIA Australia for customer insurance.

A merger, which requires Government approval, along with the passage of appropriate legislation through Parliament, is a great opportunity to bring together two super funds who share a common heritage and provide superannuation to those who serve our country.

What happens next?

There are still a number of steps to be undertaken before the merger can go ahead, including:

  • Both funds need to perform due diligence to confirm that a merger is in the best interest of members of each fund
  • Government approval
  • Passage of appropriate legislation through Parliament.

Once the due diligence process has been completed, we will confirm if the merger will take place.  If there is agreement to proceed, the merger would most likely take place in mid 2023.

What do I need to do?

If you are interested in learning more, please watch the MOU update  that was held on 11 May 2022.

 

Otherwise, you don’t need to do anything. There is still a long road ahead before any merger can take place. We will keep you informed as things progress.

 

Kind regards,

Michael

Michael Sykes
AvSuper CEO

Frequently asked questions

What does the MOU mean for me?

Nothing will change for members at this stage.

The MOU means that AvSuper and the Commonwealth Super Corporation (CSC) are now starting a due diligence process to determine if a merger is in the best interest of members in both funds.

If you would like to learn more about how the process works, watch our MOU update.

How long will due diligence take?

We expect due diligence to be thorough and complete, so it’s hard to determine the timelines. This is a big decision, and we need to make sure that the merger will be in the best interest of AvSuper members.

When will the merger take place?

Until the due diligence process has been completed, we aren’t able to say when (or even if) the merger will take place.

Why did you choose CSC?

Both AvSuper and CSC are committed to ‘serving those who serve’. CSC has a 100-year history of providing superannuation services to current and former Australian Government employees and Australian Defence Force employees and veterans. And as you know, AvSuper was formed in 1990 and is dedicated to the aviation and aviation safety industries.

As well as sharing a similar heritage, AvSuper members will benefit from CSC’s $60 billion scale in investments.

More operationally, both organisations:

  • have a large number of defined benefit members
  • partner with Mercer Administration Services (for administrative support)
  • Partner with AIA Australia (for insurance).

 

These operational arrangements mean that a merger will be more cost effective than if we were to need to also move service providers.

Why is a merger being considered?

The regulator has been encouraging smaller super funds like AvSuper to merge, with particular focus on those under $10 billion.

At the same time, the recent performance test, combined with changes within the aviation industry, has led us to consider:

  • What is our future, and
  • How can we best deliver for our members?

The board believes that a merger is in the best interest of members, and that CSC is the appropriate merger partner for AvSuper members. The due diligence process will determine if this is indeed the case.

Does a merger mean my super is now at risk?

Not at all. If CSC meets our strict requirements and we go ahead with them, your super will continue to be managed carefully and in your best interests.

I'm in the Defined Benefit Scheme. Does CSC offer this?

Yes. In fact, that’s one of the key reasons why CSC was selected as our merger partner.  CSC has excellent DB capability and manages a number of defined benefit schemes.

How did you decide who to partner with for a merger?/What process have you undertaken to get to this point?

Over a six month period, the Trustee first completed a market scan to consider potential merger partners. A request for ‘Expression of Interest’ (EOI), outlining key criteria to be considered was then sent to a number of funds, most of which responded with a proposal.

The Trustee then narrowed participating funds down to a short list for further consideration, and then as a result of those deliberations, chose CSC.

AvSuper and CSC have settled a Memorandum of Understanding agreement (MOU) which sets out proposed terms of a potential merger. But it doesn’t stop there!

Now that the MOU is signed, both AvSuper and CSC will undertake due diligence on each other, to determine if a merger is in the best interests of the members of each fund.

If, and only if, the merger is determined to be in the best interests of AvSuper AND CSC members, will a merger take place.

Will the AvSuper brand continue to exist?

This will depend on the terms of the merger agreement. We would like to retain something of the current brand, but this decision is one for the future. 

Will AvSuper staff lose their jobs?

We’ll do everything we can to retain AvSuper staff, but at this stage we can’t foresee what the future staffing might look like, should a merger take place.

Should I change my superfund now?

We can’t give you specific advice regarding your specific circumstances. If you are concerned, please speak to a financial adviser.

Why are you taking this action now?

There is a lot of activity in the Australian market now, with a number of mergers being considered, as well as new super funds being established. This environment, together with our analysis of AvSuper’s ongoing sustainability due to rising costs and other factors, led us to believe we should move now to secure the future for our members.

Does this mean that AvSuper is now in a holding pattern? Or will you continue to look for improvements? (like the recent fee cap)?

Everyone at AvSuper is working harder than ever to ensure our member’s best financial interests are upheld during this challenging time.

This means continuing to deliver improvements for our members where we can.

Is the merger definitely happening?

No. The merger will only take place if it is determined to be in the best financial interest of both AvSuper and CSC members.

Why is legislative change required for AvSuper to merge with CSC?

As the super fund for Australian Government and the Australian Defence Force, CSC is governed by additional legislation as well as the standard superannuation laws. Some of these will need to be amended slightly to allow for AvSuper members to join CSC.

While this is over and above what is required if AvSuper were to merge with a non-government fund, we believe the benefits of CSC as a merger partner far outweigh this additional requirement.

How can I get more information?

Watch our MOU update for information about about the merger process and answers to your questions.

Phone 1300 128 751 (Local call)
Email:
avsinfo@avsuper.com.au