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Is change inevitable when it comes to Super?

One of the main objections about Super is the government is always changing it. So far, no government has effectively changed the essence of the original legislation, notably around the sole purpose test (particularly relevant for SMSFs). To date, every working Australian, except for the self-employed, accumulates super through their employer contributions.

The 2018 Royal Commission into the financial services industry found some serious flaws in the management of a proportion of Australia’s Super assets but did not examine the management of the overall asset. In effect, some Super platforms and products were held to account, but the public was left with a false sense of security that the industry is now better managed than it was before. In fact, the Royal Commission simply did not examine some areas that required investigation.

With the change in government, you might expect some changes to Super as the new government moves away from the direction set by the previous. However, as a specialist in employer super, we’d suggest expecting only superficial changes in the government’s approach to the management of our super asset. “If it ain’t broke, don’t fix it”.

We would say, however, that we now have a combative democratic government rather than a house of government chaired by representatives of the people. In this new ideation of government – party lines certainly dominate, so much so that the government now only represents a small proportion of the country.

  • Let's talk about the right super fit for your employees.

The History of Super (a boring title for a vitally important issue)

Super is vital for practically everyone, but the various governments and the Super industry have not managed it like it is. Employers have now had false promises, and the wool pulled over their eyes for three decades, and so I would not blame them for having a pause for thought now. Therefore, wise employers, like you, are more inclined to seek specialist operators (like us) to manage their reward and remuneration packages. They realise Super is the biggest employee benefit in need of improvement, and that managing and overhauling their employees’ Super is a monumental exercise, as it is often the last thing to get attention if it gets any attention at all.

Considering that Super was introduced by highly intelligent people and theoretically managed by established companies led by executives with national profiles. It is surprising that the banks who made these exciting acquisitions, developed strategies of integration and cross-selling – eventually dropped this jewel they had gained years before. The media excused the error as a flawed strategy around vertical integration, which is good PR, but not a very profound explanation at all.

 

A PR exercise into Super mismanagement

For whatever reason, employers were fooled into mismanaging Super as an employee benefit. Government legislation became more of a tussle between ideologies, and there was little discussion about who owns the asset and employees’ needs. All sides of politics assumed that Super is a national asset rather than an individual’s. In effect, it has shaped public opinion to align with this concept.

Super is, in fact, an employer-funded, employee entitlement, and should be managed as such. In the commercial world, there are always two different considerations; one being what the service provider earns versus the value delivered. It is noticeable that no employer ever asks the Super service industry how they might improve their service model. Employers tend to accept what they are given; they listen to the value proposition and do not ask the service provider to prove their worth.

Without explanation to its members who foot the bill (and it’s one large bill), there is an average design through employer super that delivers average value.

On one occasion, where a large employer asked a platform to disclose every dollar that hits their revenue line – they were met with shock and a refusal to disclose the information. The platform actually expressed anger with the client who dared to ask the question.  

Who is being held to account?

Employers seem to have preconceived notions of one platform and another. Platforms seem to change the functionality of their product significantly without comment from the employer. No one is held to account effectively. Potentially, this could be because it is an employee’s money, not the employer’s.

When a major employer hesitated for a few months on changing platforms, which could have reduced administration fees to employees by $250,000 collectively. We questioned whether he would have acted the same if it was company money. He quickly realised he would not and made the move for the benefit of his employees.

Employers need to select the right platform for their employees and hold their chosen provider to account regularly on their promises to deliver superior value. This requires a significant amount of knowledge around legislation and compliance, product, and asset management, and the ability to offer advice at an individual account level.

Most employer super-platform presents a value proposition that, if scrutinised, does not deliver value at an individual account level and fails to optimise employees’ super as a personal asset.

Is there a universal solution?

When the Government introduced the MySuper investment default as a universal solution around employer super – there were two dominant designs; one known as life stages/cycles and the other a fixed investment strategy (usually a balanced portfolio). There are significant problems in optimising super as an employee benefit with both.

 

 Contact AXIS

Want to learn more? Get in touch with Roy or Richard at AXIS on free call 1800 111 299 or email consuting@axisfg.com.au..

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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.

Testimonials

Mitsui & Co. (Australia) Ltd engaged AXIS Financial Group in reviewing the existing employer super arrangements and clarifying which product provider might be best for Mitsui & Co. (Australia) Ltd and it’s group of companies.

AXIS Financial Group provided a concise explanation as to who might be best and why, in particular ensuring that the internal project team had the information to feel confident as decisions were made. The project team moved from arguably being daunted by the prospect of improving this particular employer funded employee entitlement and better understood how to manage super as a remuneration benefit through the detailed analysis and explanation provided by AXIS Financial Group

Antony Auliso
General Manager - Human Resources Division
Mitsui & Co. (Australia) Ltd

I want to thank AXIS Financial Group for their efforts in handling insurance claims on behalf of the employees of WesTrac. From the moment AXIS Financial Group were appointed to the task, they moved so seamlessly into position and have made sure that WesTrac is not only better serviced as a result but also more informed about claims progress. I also note the outstanding results achieved by AXIS with respect to marketing and placement of our employer super policy.

It seems nothing is a problem for the AXIS team and I would commend all employers to consider this service.

Gary Carter
Group Insurance Manager
WesTrac Pty Ltd

AXIS Financial Group’s knowledge of employer super is second to none.

DXC tasked AXIS Financial Group with consolidating multiple superannuation funds to a
single company-wide default fund. They delivered, displaying superior knowledge of their
industry, along with the highest level of service and diligence.
From start to finish – the initial analysis of our previous funds, the detailed tender process,
the transition to our new fund, and post-transition – AXIS Financial Group always made
themselves available for support.
We strongly recommend speaking to AXIS Financial Group for all matters relating to
employer super.

Michael McGoldrick
Director, Compensation Asia Pacific
DXC Technology