By virtue of its very nature, the super industry understands that it will continually be in a state of change. The size and growth of this industry means that it will always play a major part in Government economic policy in Australia. It is important, however, that these changes count and signify meaningful improvements, rather than perpetually tinkering at the edges. To me, the recent Government reforms (announced 5 April 2013) to the super system represent further toying with an industry already under burden of structural and operational change with FOFA, SuperStream and MySuper.
The recent volume of super reforms has led to funds and administrators implementing seemingly stop-gap solutions to meet compliance obligations, and I question if this is having the right impact and will truly result in long-term benefit.
Of this latest battery of reforms, I say ‘what is all the fuss about?’ Between 16,000 and 30,000 pensioners will be affected who are earning interest above $100k p.a. This, like the doubling of contributions tax for earners over $300k p.a., only impacts a small number of high net worth individuals. What is concerning is the impact of negative media coverage of the reforms on an already disengaged member base.
There are bigger issues in the industry.
Super providers are juggling priorities; retaining clients, attracting new business and complying with regulations. They are bolting on complex member direct investing solutions to combat the loss of business to SMSFs. At the same time they are focused on retaining clients as ‘simplified’ MySuper accounts are introduced. They are looking at scalable advice models and ways of achieving ever-elusive member engagement through a mash up of tools, calculators, business intelligence and social media.
Then there is the SuperStream ‘onion’. The more you peel, the more is revealed, the more your eyes water. This will not be solved with a simple file translation and message service as some believe; it is about reengineering business processes and systems to create efficiency and compliance gains. Many of the solutions being considered won’t scale when the contributions side of SuperStream comes online. From 2016 existing fund portals to collect employer contributions will not be compliant; however, aspects such as this are not even on people’s radar yet.
In terms of systems, these latest reforms will translate to relatively minor changes but will – yet again – inhibit implementation of real long-term solutions.
While individually the changes to administration systems are relatively simple, they take up management and IT bandwidth that distract funds from looking at the longer term. One area that will create increased systems and administration burden is around the proposed transitional taxation on capital gains. This is most likely to have the biggest impact on SMSF administrators, but will also extend into the new member direct offerings that are being added to many industry and corporate funds. Funds that have bolted on a mixture of disparate systems and services to accommodate these offerings typically feel more pain when these kinds of changes to legislation are made.
Funds are continuing to bolt on complex solutions as a way of being able to rapidly complete during the constant state of change, meaning that they are unable to take a step back and re-architect their infrastructure for the long-haul. An inability to take this step means that funds are missing out on a plethora of benefits and continuing to incur unnecessary costs and are burdened with ongoing inefficiencies.
There may be light at the end of the tunnel.
My hope is that a more structured and sustainable approach will come from the proposed Council of Superannuation Guardians, allowing funds and administrators to make strategic technology decisions, reap the benefits of modern technology and cost savings, and ultimately pass these benefits on to members.