The Employer’s Current Approach
The fact that the superannuation is a high value and vital asset that is funded by employees yet included as part of their financial package by employers, is a reflection of bad management practices. It is observed that most employees have little knowledge of how they can manage super as a major remuneration benefit for their employees, neither do they put in the effort to know.
Bad Practices in Employer Super Management
Oftentimes, employers remain with an existing service provider without reviewing the practices of their service providers. When discussing their annual service plans with their provider, employers tend to settle on what the service provider is offering, without ensuring if current plans are delivering the benefits that are in the best interest of their employees.
Any service model in treating super as a personal asset must be geared towards long-term optimisation at an individual level.
Employers should constantly assess the performance of their current service providers and look to compare alternative service models. There are currently three dominant employer super service models:
- The default employer fund using a default investment option (currently MySuper)
- The service model where personal scaled advice is provided at an individual account level
- The service model where employees decide their own super fund
The most common model used to be the first model, where the employer selects a default super platform for employees to contribute to. This model provided the benefit of discounted fees and automatic insurance without the need for underwriting. However, due to clever marketing plans, exacerbated by the Royal Commission in 2018, fewer employees opt to go with the employer’s choice of super and instead choose to go with their own super plan. This often results in employees ignoring their super as a wealth creation strategy.
This change in market preference is not based on research and analysis but on the promise of low fees and high returns. To date, employers rarely examine the claims on fees and investment returns made by their super product providers.
Best Practices in Employer Super Management
Employers can obtain the best results by examining alternative service models and consider which model will provide the highest value in terms of cost, contribution or investment strategies. A suggestion for employers is to examine the existing super plan with the participation of the employees who own the plan.
Here are some steps on how you can examine your current super plan:
- Keep your employees informed about the current super arrangement and the alternative options available.
- Conduct an employee survey to find out what your employees want from their super plan
- Detail the findings in a report to be presented at a formal meeting involving management and employees.
- Have a meeting with your current product/service providers to examine how their model optimises each employee’s super balance, involving both management and employees.
- Define the optimal super plan as one that delivers on maximised profits for individuals in preparation for their retirement
Should you want to better understand how to best manage super as a personal asset, please follow us on our LinkedIn page and contact one of our experienced specialists. Alternatively, you can visit our website: www.axisfg.com.au
This document was prepared and issued by AXIS Financial Group (ABN 21 092 889 579, AFSL 233680). The information contained within it is not advice. It provides general information only and does not take into account your individual objectives, financial situation or needs. You should assess whether the information is appropriate for you and consider talking with your financial adviser before making an investment decision. Information in this publication, which is taken from sources other than AXIS Financial Group, is believed to be accurate. However, subject to any contrary provision in any applicable law, neither AXIS Financial Group, nor its employees and directors, provide any warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it.