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Superpartners recently sat down with Melinda Howes, Director of Policy and Industry Practice for ASFA. With the announced proposed legislative changes and initiatives, ASFA see a number of opportunities for the Industry to create a more efficient, cost effective superannuation system.
Supporting the Super Review
At the end of May, the Federal Government announced its Expert Panel to review the governance, efficiency, structure and operation of Australia’s superannuation system. Also known as the Cooper Review, the Expert Panel will report to the Government by 30 June, 2010. Sandy Grant, a Superpartners Board Director, was named as one of the Panel members. Sandy also serves on the Boards of Members Equity Bank, CareSuper and ACTU Member Connect.
“Efficiency and cost are major initiatives of the Super Review, and I would expect that the Industry has made significant impact prior to the 2010 report,” said Melinda.
ASFA is supporting the Review by leading a project to address the key issues, including increasing processing efficiencies, improving service to employers and fund members and reducing administration fees charged to fund members.
ASFA have spearheaded the project through a national road show, named The Think Tank. Throughout June, ASFA CEO Pauline Vamos, and Melinda Howes hosted face-to-face discussions across the country with our Industry’s CEOs and heads of business. “It was clear from the discussions that superannuation funds welcome a transparent environment where fees and costs, as well as services offered by different super funds, are compared on a like-with-like basis,” said Melinda.
“It was felt that the Cooper review should focus on value for money, rather than solely on cost, reflecting the fact that there are different levels of service being offered by different funds. For example, some but not all Industry Funds now offer integrated advice services.”
Future for Industry Super
ASFA projects that the Industry will go through further consolidation in the coming years and the Industry Super sector has more growth to come. According to Rice Warner, our current level of over 500 Super Funds will decrease to 220 funds by June 2013.
“According to Rice Warner, we expect that over the same period there will be an increase in both the market share for Industry Funds, with the number of Industry Funds available to decrease, “ said Melinda.“Self Managed Super Funds won’t see much growth, but we believe that Industry Funds have the most opportunity to grow in the coming years,” said Melinda.
Opportunity for growth
ASFA believes that Industry Funds have a unique opportunity to offer their members more personalised services.
“A one size fits all product doesn’t apply to superannuation anymore. Our demographics are ageing, and soon-to-be retirees require advice and look for tailored pension products to suit their lifestyle.” “If they don’t offer accessible, affordable advice and support tailored products, Funds risk members exiting in droves to get customer service elsewhere,” said Melinda.
Role for administrators
“As members move to post retirement, administrators will play a key role. Products will be more tailored and members will want more information, be more engaged and involved.”
“Some members are perfectly satisfied with standard contact centre services and an annual statement letter. New members may prefer they receive balance notifications via a text message, manage their account on self-service website or get financial advice in a chat room,” said Melinda.
ASFA believes that with the evolving administrator role, there needs to be a review of the way administrators are paid for their services. “We can’t continue to pay administrators on a dollar per member basis. As an Industry, we should consider a fee for service model for administrator services,” added Melinda.
ASFA suggests that while e-commerce changes will help on efficiency, providing tailored services on the existing admin fee model is not possible. “The benefits are profound. There are opportunities to improve transparency. Furthermore, cost reductions and savings will pay that investment back. It will also ensure that administrators have the capital to invest in new technologies, services and improved processes,” said Melinda.
Superpartners position
We are supportive of the Government’s initiatives such as the Super System Review and the Henry Tax Review. But we can’t ignore the benefit of having stability in the legislative framework otherwise the reviews could lead to increased costs to the Industry and in turn, for the members. It’s also important for members’ confidence that change is kept to the minimum; every time the system changes, confidence is shaken.
Because we are dealing with long-term locked-in savings vehicles, people need to be confident that the rules won’t change to their detriment after they’ve put their money in.
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