Australian pensions Equip Super and TelstraSuper are exploring a tie-up that would create a A$60 billion (US$41 billion or RM172.64 billion) fund, the latest of the industry’s smaller players to join forces.

The boards of the two funds have entered a merger agreement via a non-binding memorandum of understanding, according to a statement Wednesday. The plan is expected to be completed late next year, pending due diligence.

The regulator is encouraging consolidation as it tightens scrutiny of pension fees and performance, though deals have been relatively quiet given their cost and complexity. Australian Retirement Trust recently agreed to merge with smaller rival Qantas Super, while CareSuper and Spirit Super are also merging.

Australia’s pension system, one of the world’s largest, is nearing A$4 trillion in assets that are forecast to more than triple by 2048, according to Mercer analysis. The firm also predicts that mergers will see just a dozen funds controlling more than A$100 billion each by 2028.

Equip Super, with around A$35 billion of assets, was established in 1931, while A$26 billion TelstraSuper is the corporate fund for Telstra employees. They have a combined 225,000 members.

  - Bloomberg