Hello fellow super enthusiasts!

Maybe my opening line should be ‘Hello fellow super enthisiasT’, as after my last blog where I was hoping to hear from a few people about SuperStream preparedness, I was shocked to only get one comment. Anyone would think super is boring but that’s just a silly thought! Like me, I know you too are constantly thinking of superannuation…at the dinner table, in the garden, when driving along in the car or van, on the way to the airport, in your sleep….ok you get my point.

So, anymore takers out there who want to share where things are at in terms of planning, strategising, modelling etc for the biggest changes to our industry since it started? I am of course talking about the Stronger Super reform package.

How about where things are at in your fund/service provider when it comes to using Tax File Numbers as a primary identifier? After all, we get to flick that switch on as of 1 July 2011….or will we? I notice that the legislation has been referred to – or in technical language, is ‘stuck’ at – the Senate Standing Committee for the Scrutiny of Bills. Watch this space….

As ‘the industry’, what’s going on out there, what are you doing in preparing for change….anyone out there, is this thing on?

Yours in Super,

 Hans

Hello fellow super enthusiasts!

By now you should have read and digested the Federal Budget papers released on 10 May 2011 and in fact, if yours are like mine, they have now made their way from the ‘to read’ pile over to the ‘to file’ pile.

There were no super surprises in the Budget. Superannuation didn’t feature as prominently as it has in the past and this was expected given the major body of work going on at the sidelines…I am of course talking about Stronger Super.

That being said, the Budget did contain something pretty important…no I’m not talking about the set top box for pensioners initiative… (although I am only a few years off from being eligible….) I’m talking about the Government’s financial support for Stronger Super. This commitment confirms that these important and necessary reforms are not just discussion topics or hypothetical outcomes that are being philosophised by a few super nerds, like myself, in obscure alternative cafes and delis (the closest to a good Dutch cheese shop you can find); they are in fact a reality. Stronger Super is a real program with real benefits to members. This support is fantastic and should not only be applauded but reciprocated by the industry. 

Whilst Stronger Super is the way forward (I’ve been waffling on about this for some time now!), there is a lot of work to be done. It’s important that we don’t just sit back and expect this to magically happen “by others” or just expect the benefits to come to fruition without any real effort or input.

Making SuperStream (my pet collection of reforms) a reality is a joint responsibility for the industry and Government. We need to work cooperatively and I guess one of the ways we can do this is by knowledge sharing.

So, put on your thinking caps and answer me this…where is your fund at (or organisation if you are a service provider)? Where do you think the industry is at in terms of making Stronger Super a reality? You can tell me in ‘stars’ (or consistent with super industry practice, why not use a fruit!), you know, one to five, or you can just give me a code word…good, bad or ugly. 

I’m waiting to hear from you, and in the meantime, it’s tea time!

Yours in Super,

Hans

Hello!

Thanks for tuning in again! I trust you were bowled over by the amount of change the industry has undergone over the years and remember, I only listed some of the big ones, there were plenty more.

Now, it’s time to look at the system that’s evolved over the years . As you’re probably aware, with no industry architect in the early days,  how this compulsory system could be run efficiently was never really considered!

The  obvious problems which need to be fixed include…

• The Super Mexican Standoff: To meet their Superannuation Guarantee requirements, generally, employers are required to make contributions to a superannuation fund. However, there is no requirement for employers to provide data in a set format, indeed no requirement to provide any data at all! This was later “fixed” by making it unlawful for a superannuation fund to hold money it cannot allocate to a member. This is known colloquially as a “Mexican Standoff” and is less than efficient – you send whatever junk data you like and we will send back what we can’t sort out.
• Lost Super: The system has generated about 33 million superannuation accounts for around 11.5 million employed Australians. About 5.8 million accounts are considered ‘lost’ and this is worth around $18 billion. Hardly efficient.
• The Super Cost of Transactions: In the Cooper Review, it was noted that it costs $3.5 billion annually to undertake 100 million transactions. So two points here – $3.5 billion is a lot of “leakage” from the system and $35 per transaction is unacceptable.
• The inefficient business model: The Cooper Review looked at this industry from the perspective of looking after members. However, there are many vested interests that will be adversely affected, directly or indirectly, by any change to improve the current problems. Controversially, I would say that many have business models based on the inefficiencies in the system. Inactive accounts provide fees and scale to funds and administrators; large ‘feature rich’ accounts are cross subsidised by small inactive accounts etc.

So here we are with Cooper holding a mirror up to the industry and the Government responding, and largely agreeing, that it’s time for a tune up. It may well be decades before another opportunity comes our way to make this industry great – to clean up the inefficiencies and pass the maximum value of contributions on to benefit members in retirement. All the people with self interests at heart will be there with their ‘one in a million’ reason why this and that will not work. But it is crazy to have so many accounts and for it to be so costly to administer.

And perhaps the Medicare small business superannuation clearing house is a window to how the future may look – all data is electronic, only one data format, only one way to pay and one system to learn. For superannuation funds receiving the data, all data comes looking the same, with much less chance of error. This is just one piece of the puzzle but it does indicate what is possible.

Let me know what problems I’ve missed and how we can fix them. Now is the time to share ideas and start getting some solutions out there.

Signing off for now,

Peter

Hello!

I’m Peter Edmiston and I’ve been working in the super industry for a few years, I think about 40 at last count!! And now, I have reached my career high with a guest appearance on Hans’ blog! I’ll be here for a couple of blogs to give my two cents worth on the industry and what I’ve witnessed.

It has been suggested that we have tinkered with the system a lot over time yet we still don’t have it right. Can I just say that I have been working in superannuation for over 40 years and each change has felt like a fundamental change to the system as opposed to ‘tinkering’. I think what has also happened, and maybe the cause of the ‘tinkering’ comments, is the increasing pace of change.

Some of the fundamental shifts that have happened in my time include:

• Bundled life policies: Insurance and investments were once provided by the one “House” unlike the unbundled approach of today.
• The move towards universal coverage: Early on, superannuation was for the privileged few; those who worked in Government, banks and very big companies. Even then it was restricted to white collar staff. Women had to work longer than men before being invited to join the fund and eligibility for the employers’ contributions was based on years of service. This meant you may have had to work with the company for 30 years before becoming eligible to all the employer contributions. If you left after, say, 4 years you would not receive any employer contributions. So through Awards, and then through the Superannuation Guarantee Charge, coverage extended to this wider group. And all employer contributions vested in the member straight away.
• Industry funds were born: This meant one fund for thousands of employers rather than thousands of funds, one for each employer. Also, if you stayed in the same industry you just kept in the same superannuation fund (or that was the theory at least!).
• Defined Benefit Funds: Some of these rare and endangered funds still exist! However, mostly our industry has moved to defined contribution funds – where the investment risk moved from the employer to the member.
• Removal of the nexus between employment and superannuation: At one stage, you had to be employed (or self employed by gainful personal exertion) to have superannuation. The thin edge of the wedge was the introduction of Spouse Accounts, then came splitting under Family Law, Contribution splitting, Child accounts and Better Super (see next point).
• Better Super: This was a total change to remove some of the basic complications in the way superannuation was set up including removing the tax structure on lump sum payments and setting maximum contributions that receive favourable tax treatment.
• Governance: A truck load of regulatory, governance and compliance requirements ASIC, ATO, APRA (once the ISC…another change! ) the SCT, Auditors to audit the auditors etc etc.
• Member Choice of superannuation fund: A chance to keep one superannuation account all your life (just like your bank account). Well again, that’s the theory at least – there are still many loopholes here and, as an industry, we’ve seen that this isn’t quite what happens in practice.

Now that you’ve got my view of the history of super in a nutshell, you should share your version…have we been tinkering or not?

Next week, I’ll run through some points on improving the system…

Signing off for now,

Peter

Greetings Super Enthusiasts!

I am writing this blog on my trusty ol’ Blackberry (poor thumbs) from a rather wet Byron Bay. Yes, even this super enthusiast needs some “reflection” time every once in a while… and what better way to do this than at the Blues and Roots festival, listening to the beautiful sounds of Bob Dylan, Grace Jones, BB King, Taylor Swift (WHAT! that is what happens when you leave your iPod in charge of your 8 and 10 year old daughters).

The industry has been extremely busy with its main focus, Stronger Super. We have seen and heard many and varied views and no doubt we will hear more.

As an industry, we seem to be seeking alignment on important, and often complex, issues like auto consolidation, ecommerce, MySuper etc. But maybe that is too ambitious. After all, it is already clear that Stronger Super will not always be “win/win” when improving our super system to meet the needs of members for the next 20 years and beyond.

I strongly believe that whatever we do has to meet only one simple test: “Is it in the best interest of the member in the long run?” If the answer is “yes”, we must do it, even if that means some  (or a lot of) pain for some in the meantime.

Now it is your turn. What is your test and are you prepared to share it with us?

Enjoy your Easter Break (I know my thumbs will….) and please be careful on the roads.

Yours in Super

Hans

Hello fellow super enthusiasts!

I was doing some critical work on my tablet device last night (trying to increase my high scores is a very legitimate endeavour!) and pondering two of society’s biggest issues….World peace and of course lost super and tax file numbers (TFNs).

Here’s a question: Has taxing no-TFN contributions at the highest marginal tax rate generated behavioural change which has resulted in no-TFN contributions being a thing of the past?

 Alright, maybe that is a little bit optimistic.

I took a guess and thought that it made no-TFN contributions worth, say… $50m a year, or maybe at a stretch $100m.  What I didn’t expect was to find that in the Taxation statistics 2008-09 report, the figure for no-TFN quoted contributions was over $425m!

TFN use needs to be part of mandated data standards for employer contributions.

Let’s say that again!

TFN use needs to be part of mandated data standards for employer contributions.

It’s time we got serious about lost super and the data quality in the industry…..World peace, well that will have to come second!

So, as an industry participant, what do you think needs to be done? Should we just follow the ‘no ticket no ride’ approach and implement ‘no TFN, no super’?

The faster we solve this one, the faster I can move onto world peace!

Yours in Super,

 Hans

Hello fellow super enthusiasts!

Well, can I just say that quite a bit of water has passed under the bridge since I wrote my last blog! Yes, time sure has flown and what have I been doing? Now now, I know what you’re thinking, and no, I wasn’t sunning myself on holiday somewhere exotic. On the contrary, I’ve been er “sunning” myself on the Treasury SuperStream Working Group. To me, that’s just as exciting but I’m sure not everyone is quite like me!

If you’re keen to have a look at some of the publications and consultation material regarding Stronger Super, head to the official Stronger Super website. It’s at http://strongersuper.treasury.gov.au. On the site, there is a good presentation on Standard Business Reporting (SBR) and also an issues paper relating to the scope and transactions covered under SuperStream. Both of these are definitely worth a look, so please have a read – I like to look over these things with my highlighter in hand – and let me know what you think!  

Yours in Super,

Hans

Hello Fellow Super Enthusiasts!

The highly anticipated event of the year has finally occurred….not Oprah but Minister Shorten’s blueprint for “Stronger Super”. Yes, that’s right! Having responded to the Cooper Review recommendations, all 177 of them, Minister Shorten has delivered an early Christmas present to all Australians. Have a look at the response here.

It is fantastic to see a commitment to pursuing Superstream and MySuper which will ultimately deliver better retirement outcomes for members. After all, that is what it’s all about isn’t it? The blueprint outlined by the Minister will provide the industry with greater certainty about where the super sector is headed.

The Government has committed to undertaking significant consultation with stakeholders on how best to implement these reforms. As administrators of some of the biggest super funds in Australia, Superpartners is looking forward to continue working with the Government and industry to contribute towards making Stronger Super a reality.

Now, being the super hero that I am…where’s my cape… I am still reading, digesting and absorbing the 63 page response so once I finish having a look, I’ll post up a few more thoughts. In the meantime, please share what you think. How do you think we can best implement some of these recommendations? What role do you think administrators should play in the process?

Yours in Super

Hans

Hello Fellow Super Enthusiasts!

Early Christmas present from ASIC arrived for me yesterday in the form of Class Order CO 10/1219 Facilitating online delivery of PDSs, FSGs and SOAs and Regulatory Guide 221, Facilitating online financial services disclosure. Being the super fanatic that I am, I couldn’t have gotten anything better…well maybe 12% SG.

What is this guidance and relief all about I hear you asking! In a nutshell, or something else really small, it’s to provide some practical assistance to financial service providers, like us in the super industry, about delivering online disclosure to members. You know, things like product disclosure statements (PDSs), financial services guides (FSGs) and statements of advice (SOAs).

The Class Order provides relief and helps to clear up some of the confusion surrounding practical issues, such as when the disclosure was ‘sent’. Currently, under the Corporations Regulations 2001 (have a squiz at regs 7.7.01 (2) and 7.9.02A (1) if you want to see what I’m on about) a PDS, FSG and SOA has to be delivered in a way that provides some comfort that the member has actually received the information. If you simply send an email to a member with a hyperlink or directions to access the material etc, it could be argued that the disclosure has not been ‘sent’ as the member still needs to do something to access it…and we all know that not everyone does as they are asked.  Well, I do when Mrs Hans asks me!

The Regulatory Guide also covers several other areas and provides good practice guidance on topics such as version control, security and retrieval. It’s worth a read especially as we’re heading more and more into the online space. What do you think about online disclosure? Is it going to provide cost savings and increase member engagement or is it a security problem just waiting to be tested? I would like to hear your thoughts on this stuff.

One more thing, don’t forget to use the new subscription service for this blog! Yes that’s right, I have listened to all the fan mail – by the electronic bag full – and gotten a thingy ma jig put on the blog site so you can enter your email and receive an update every time I write a blog. Come on now, you know you want to register!

Yours in Super

Hans

Hello Fellow Super Enthusiasts!

It’s good to see that the Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, released the Inspector-General of Taxation’s Review into the ATO admin of the SG Charge report last week. In a nutshell, the review looked at the ins and outs of the ATO’s administration of the SG charge and also the level of employer non-payment of super.

Surprise, surprise! The review found that those most at risk of not getting their super paid were also the least empowered to push the issue – casuals, low paid workers and younger workers. This is a pretty nasty problem given that we know a 9% SG doesn’t produce a comfortable retirement. So, not getting your entitlement at all just compounds the problem even further.

Anyway, before I get distracted and start ranting about equity, inefficiency, behavioural shifts etc, I want to talk about unpaid contributions.

The report states that at least $600 million of unpaid super contributions are still outstanding. This is a ridiculous amount, especially when we know that implementing Superstream will involve costs and contributions tax on $600 million. Contributions tax on even half that amount would certainly help. Let’s do the sums. Where is my slide ruler….ah ha! So, $600m at 15% contributions tax is $90m which sounds pretty good to me and even if only half the amount was recovered, that’s still $45m!

Through better use of the TFN, the industry can assist members in keeping employers honest (oh, I know most employers are honest, it’s just those that are not which give everyone else a bad reputation) and that way, this problem won’t keep escalating at such a rapid rate.

I haven’t finished reading all 111 pages yet….I have been busy shaving my mo after my effort in Movember. If you have read it, or even parts of it, I would very much like to hear your thoughts!

Yours in Super

Hans