There are three key areas that could influence whether your experience with your default super fund is painful or productive. These areas are service, performance and insurance.
Superannuation is a highly regulated field and can be quite complex. If a mistake is made, it could result in fines, in addition to unhappy staff. To further complicate things, every year the rules surrounding super change. This June, the big news is that all businesses must start paying and reporting contributions electronically, and in a specified format.
The way a super fund provides service can make the process of remaining compliant a lot less painful, and help you manage some significant risks. Firstly, a superannuation fund’s payment interfaces, systems and administration services are the nuts and bolts of managing your employee’s retirement savings.
The payment interface is how you (or your payroll team) pay and report contributions. It is the single biggest influence on efficiency with respect to superannuation. Today, many super funds offer a clearing house. This interface enables you to pay super to more than one fund, on behalf of more than one employee. A clearing house is a ticket to the game and you should demand this service as a bare minimum.
Some clearing houses are already compliant with the changes coming up in June, and offer a range of other benefits as well.
Chief Executive Officer of Intrust Super, Brendan O’Farrell says, “We had a great year last year bringing the larger businesses across to the new payments and data standards. Our SCH Online clearing house is compliant with the standards and offers as one of its upload options, the SAFF format. That format is not only popular with a lot of our clients, but it’s compliant with the new standards.”
But a good clearing house is about more than compliance, according to O’Farrell: “One of the first key differences between clearing houses is whether payments and reports can be executed out of a single log-in and data upload, or whether you have to log-in or upload once for staff who use the default fund, and a separate time for staff who choose a non-default fund. The latter is essentially doubling your workload.”
“Another key difference is how the clearing house manages multiple sites. Do you need to set up an account for each site you manage? Or can you pay all your super contributions, across all sites, through the one log-in and upload?
“Our clearing house allows you to manage all staff and all sites out of the one log-in. It also offers a range of other features that we thought would be particularly important for hoteliers.
“For example, when staff resign and then return next season, there is a simple ‘rehire’ function on our clearing house. This means you don’t need to terminate and then recreate staff profiles every time the busy season starts or ends.”
Not all areas of good service can be delivered through software alone though. As complex as superannuation can be, it’s important that businesses and their staff have access to real people to provide the necessary guidance.
“We’ve worked hard to blend technology and innovation with good old-fashioned service” said O’Farrell. “Our Client Services Managers are dedicated to meeting the needs of the businesses we service. They’ll visit you on site at frequencies that suit you and your business. They’ll not only help guide you through any superannuation issues, but they’ll be there to support your staff as well.”
Financial advice is an additional part of the service offered by some super funds.
“Businesses need to constantly change and sometimes this means restructuring. One of our clients recently restructured a part of their business. As part of it, they gave some staff the option to take a redundancy. These issues aren’t to be taken lightly, so we sent our financial advisers to the various sites impacted by the restructure. The business, our client, got that extra level of comfort that their staff were being looked after during a difficult time.”
According to O’Farrell, the most basic of services can have the biggest impact. “We’ve been using electronic forms, online technology and phone technology for a long time. By integrating them with the right processes and human interaction, our members can consolidate their super, find lost super or take their super from one employer to another. All this is done with minimal effort on the member’s part. In most cases, all it takes is for the member to give us the go-ahead, and then we can do the rest.
“This is particularly important, I think, for hospitality workers. The hours can be extraordinary, a lot of the workers are students and many also have families. So we’ve designed our services in such a way that they can be exploited online or over the phone in less time than it takes to have a tea break.
“Just as our business clients have their own Client Services Manager, our members are allocated with their own ‘Super Concierge’ – who makes everything happen for them.”
What a lot of people don’t realise, is that fees and performance are very closely related. Super funds will generally charge an administration fee and an investment fee. The investment fee comes off returns before returns are published. This means that a super fund could have a very high investment fee, but if their performance is still ahead of their peers, then the fee is worth it – the member is still financially ahead.
According to O’Farrell, “it’s important to ensure your super fund has reasonable administration fees. In this respect, it is worthwhile considering the fact that industry funds do not pay dividends to shareholders – so that’s one cost they don’t have to worry about. Typically industry funds outsource a lot of administration to very large, centralised providers. These providers have massive scale and can administer accounts more cost effectively.”
Returns do vary over time. So it’s important to look at a fund’s medium- and long-term returns, rather than just the way they performed last month.
Most super funds offer some form of insurance for death, total and permanent disablement (TPD) and income protection. The key differences tend to be:
1. What is the default cover? In other words, if a member joins up and chooses nothing, what types of insurance would they have and how much cover would they receive?
2. How much can a member increase their cover without providing further personal health statements and reports?
3. How much are the premiums?
4. Who is eligible?
Funds that offer generous default insurance cover provide an added comfort to staff who are somewhat disengaged with super and have not organised or afford other forms of personal insurance. For example, default income protection could mean that casual staff, who may not be entitled to sick leave, have access to an income if they become too sick or injured to work.
Premiums for the insurance are paid out of members’ superannuation balances. This means that a member is not paying it out of their own back pocket. Needless to say, the lower the premiums, the less of an impact premiums will have on a member’s account balance.
As raised earlier, many casual staff aren’t eligible for sick leave. Similarly, many insurance policies do not cover casual workers and potentially do not cover other types of staff (e.g. temps, contractors etc). O’Farrell says: “The hotel industry depends on flexibility in the workforce to operate. So it’s important to consider what percentage of your workforce would actually benefit from a fund’s insurance policies, versus how many would simply not be eligible.”
“We’ve tried to develop a model that is tailored for the hotel industry in terms of conditions, features and costs. In doing so, our offerings have been recognised by Money magazine. They have awarded us the ‘Best Value Insurance in Superannuation’ for four consecutive years – so we obviously have broader appeal too.”
Choosing the right default fund for your organisation could deliver real benefits for your staff and considerable efficiency benefits for your business. Unfortunately, it can be a complex exercise and can be overlooked as one of those “non-core” issues that doesn’t command priority.
Independent consultants such as SuperRatings assess superannuation funds against all of the areas discussed in this article, and much more. The research is used by many individuals to choose their own personal superannuation. However, such research can also be used by businesses to help choose an appropriate default fund for them.
“We’ve always tried to keep our costs down while maintaining great service for our clients and members,” says O’Farrell.
“It’s a challenging balance but pleasingly, we’ve been rated a Platinum Performing Fund for the last ten years by SuperRatings. It’s an increasingly competitive industry – so we continue to work hard to improve. But it is comforting to have independent experts acknowledge our achievements.”
For more information about Intrust Super visit intrust.com.au