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Super Financial Packaging

Management of remuneration

Super is a significant component of any employee’s financial entitlements and yet it is not particularly well packaged by employers. Is it just a cost set and controlled by the government? Or is it potentially an attractive benefit for employees? 

If it is the latter, it would be in the employer’s best interest to ensure high value is being delivered by their super provider. Every Financial, HR and Remuneration Manager should realise that super as a remuneration benefit is easy to manage if you actually define what you want.

Interesting perspectives?

Excessive reregulation and the complexity of most product models have made it extremely difficult for employers to understand and analyse the performance of their provider. 

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

Perspective 1: Sales Model or Service Model?

In business when we speak about sales models we are all discussing pricing and margin structures. On the other hand some suppliers do have an eye for managing their service model, defined as the value being delivered to the client.  As an overall observation, the financial services industry appears to be overly dependent and focused on their sales model. Product providers around super have limited capability to manage super as a remuneration benefit, very much proven by the fact over 80% of members in employer super are invested in their MySuper investment default. Regulatory emphasis on the MySuper investment model along with the reluctance of product providers to provide a service aimed at optimising super as a remuneration benefit by providing personal scaled advice at individual account level is misdirected.

The reason for this misdirection is uncertain, basically because it is so illogical. The recipe for optimising your super balance and therefore your income in retirement is a combination of cost control, maximising your contributions, and actively investing in line with the next 2 year market cycle. Sitting inside one investment selection for the period of your career will not optimise your super.  

As a remuneration benefit, super is a wealth creation strategy and as with every wealth creation strategy, it does grow better if you give it some sensible attention.

Perspective 2: MySuper Design

There are a variety of MySuper investment defaults presented by various products. Some of them are a fixed balanced fund and some present a life cycle strategy where the funds are exposed to more growth assets and less defensive assets early on before being de-risked as an individual approaches retirement.

Only one product provider has altered the design of their MySuper investment default since its introduction.  Everyone else has remained with their original design even if the asset allocation has moved. Some MySuper investment defaults are revalued on a daily basis dependent upon market forces where some others have a high proportion of direct and illiquid assets which are only periodically revalued based upon revaluation by an independent valuer.  Market forces are promoting MySuper as the permanent solution in managing everyone’s individual investment strategy. Unfortunately there is more than one design flaw in MySuper, a strong example being the selection of the one balanced fund as the MySuper investment default and its negative impact preventing optimisation of the asset at an individual account level.

Perspective 3: Older Australians and their insurance

Unlike asset management above which remained free of scrutiny by the Royal Commission, insurance did come in for some attention but maybe not quite enough. Within employer super, if you examine the age structure of premiums, you will find that around 50% of the premium is actually paid by 15% of the plan population. Premiums become more expensive as you get older and insurance premiums become most expensive after age 50. One can understand that maybe the older you become, the higher the risk of a health challenge.  

The payment of premiums where employees are accumulating high balances, damages their contribution strategy, something that becomes more and more vital as you approach retirement with return on investment not so secure. Employees might have more assets, minimum debt, no dependencies, and no health issues and yet they are still paying for insurance.  

Every employer who subsidises their employee’s super plan needs to consider insurance design rather more closely than they do. 

What do you need to do?

Sometimes modern life is a rush and everything is just too packed up together and many workers have little time to think before they are blamed for their hasty decision. I was once told that “preparation precedes performance”, a saying I have often repeated when considering a future decision.

Employers who are serious about their employee’s well-being and welfare, especially about that significant part of every employee’s package known as super guarantee contributions, are welcome to contact one of our consultants on 1800 111 299 or by email at super@axisfg.com.au to find out if they can unpack the mystique of employer super and deliver a superior remuneration benefit to their workforce.


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