Financial services companies, banks, unions, accountants and financial planners have all unified to create a large industry, but they do not necessarily deliver good service. As super is an employer funded personal asset, many employers have discovered the need to have a default fund to ensure they meet their obligations under the super guarantee rules. Things have become even more complicated with the introduction of various license regimes and the imposition of ever more complicated regulation.
Employers who pay attention
The most complicated component of any employee package is very much their super. Company management rely on the financial services industry to provide value but to date they must have been (or will be) disappointed.
It’s near on impossible for any remuneration manager to maintain the technical expertise to properly analyse the value being delivered by their current super provider and then to know how to actually see service improve in a way that would allow them to announce that their employer fund is a superior benefit and capable of optimising the balance of their employee super accounts.
Super providers hold their cards close to their chest and will not reveal anything that shows them in a bad light, making it difficult to implement effective change.
For instance, the MySuper default was introduced to reduce cost but not necessarily to increase investment performance. The regulations around cost disclosure provides for only some of the costs. There are other costs in all products that are not disclosed but all impact on the return that could be earned at individual account balance. As an employer, you would expect any supplier to fully inform you on all costs that might be incurred in the delivery of the end value to your employees but this is not the case.
There is also a difference in investment choice menu across all products and the quality of the options available. The majority of members are in the MySuper option but it is possible to obtain higher returns without extra risk if the right options are available from the investment choice menu. Investment costs and possibly administration fees are higher if you start to invest outside of MySuper. However again, a lack of knowledge around corporate super products stops you from knowing what services to demand and value you want delivered.
The good employer
Despite this, in the past couple of years, employers have started to adopt new practices around the management and provision of financial benefits to their employees. Employers are finding ways to differentiate themselves from others, to help them attract, retain and motivate the best people. The most notable indicator of this development is the number of remuneration managers now examining employee reward structures and their benchmarking against others in their industry.
They have some information to work with, the government actioned Productivity Commission was designed to examine the super market and recommend changes but to date these recommendations have not been fully endorsed by the government.
A second initiative from the government is a heat map analysis carried out by APRA. Click the link for more information https://www.apra.gov.au/mysuper-product-heatmap
The limiting factor around this analysis by APRA is that it only compares costs, investment returns, and the sustainability of member outcomes around MySuper. Much more information is required to properly evaluate super as a remuneration benefit.
So what can employers do? Every employer needs more information than their product provider is going to tell them. So step one is to find a source of technical evaluation and benefit design. Many employers try to create benefit by commissioning change without actually understanding the problem. A key element of company performance is the motivation of its work force and so it’s important to take the time to find the right information and consider the value of the products and service you are receiving.
AXIS Financial Group can help you to evaluate your super provider and find the right fit, get in touch today.