Following the release of the Cooper Review proposal, the Australian Superannuation industry is bracing for its next big change. The report – compiled by Jeremy Cooper, the former Deputy Chairman of ASIC – proposes the introduction of MySuper which, according to the 2010 Australian Government report MySuper, Optimising Australian Superannuation is “…a product with a single, diversified investment strategy designed to suit members as a whole”.
MySuper aims to provide a simple, cost effective product with a diversified portfolio of investments for the vast majority of Australian workers who are invested in the default option in their current fund.
The report asserts that MySuper recognises that direct engagement in superannuation decision-making is not a priority for much of the population. MySuper will seek to cater to this core demographic – ensuring that there is a simple, value for money, effective product available for members. It will be geared to appear conceptually simple, even if the underlying structure of the product remains complex.
MySuper will bear many similarities to the current default option available across super funds, however, according to an April 2010 Financial Standard article, where it will differ is on the layer of costs. MySuper will have no contribution fees, exit fees would only be charged on a cost recovery basis and no performance-based investment management fees would be paid to or by the trustee, subject to conditions.
Scepticism has ensued following the release of the Cooper Review. According to a recent article in The Australian, industry players fear that MySuper runs the risk of restricting investment choice and returns, increasing regulation and discouraging members’ active engagement with super.
In a media release issued by the Investment and Financial Services Association (IFSA), John Brogden, IFSA’s CEO said “There is nothing in MySuper that isn’t already available in the market today at similar cost – and with consumer choice and control”.
Brogden further asserts that “MySuper will deny people the control and choice they want in their super with a dumbed down, one-size-fits-all approach”.
The aforementioned The Australian article highlights that, despite its detractors, the MySuper proposal has attracted significant industry support, with some believing that “…if something is simple, people can understand it and they will become more engaged…”.
Support it or not, acceptance of the Cooper Review proposal will mean that super funds will need to make changes in order to accommodate MySuper. In order to reduce cost and complexity to members, funds will be required to create an offering that has low fees but limited options, and this will mean that back office systems will need to be configured to meet these changes.
Darren Stevens, Bravura Solutions’ Global Head of Product – Wealth Management said “Offering a low-cost option to members will mean that funds are going to want to run a low-cost operation to manage it, and so the focus is going to be on streamlining systems and shaving unnecessary costs.
“Electronic processes, real time processing and straight through processing are going to move to the top of the list of priorities for super system selection. Providers are going to want flexible software solutions and will need to move quickly to take these new products to market”.
Bravura Solutions’ eBusiness product for superannuation, ePASS, can help a business take new products to market quickly, whilst increasing efficiency and reducing cost.
“ePASS offers superannuation providers real time processing, straight through processing and the ability to provide customer self service. It allows for round the clock availability, provides a single customer view (delivered to both the web and call centre channels), and delivers a highly flexible user interface,” said Stevens.
Current ePASS clients benefit from reduced total cost of ownership (for both deployment and configuration) and simplified employer superannuation contribution through integration with payroll systems.
Bravura Solutions’ Talisman, a service oriented architecture based wealth management solution with functionality for superannuation, also provides the real time processing required to deliver the business efficiency providers will need to effectively manage MySuper.