Superannuation funds will save $20 billion over the next decade if the Cooper review’s SuperStream is implemented, according to new research released today by the Financial Services Council and Ernst & Young.
The bulk of the savings would come from making electronic transactions mandatory and straight through processing.
The research, The $20 billion dollar prize, released at the Financial Services Council Annual Conference in Melbourne today, lays out a blueprint for implementing SuperStream and outlines the opportunities and challenges.
It found that implementation would require a $1 billion investment across the industry.
SuperStream is the package of back office reforms proposed by the Cooper review. The recommendations include removing paper and cheques from the system, creating standard contribution and rollover forms and extending the use of tax file numbers for consolidating accounts.
John Brogden, CEO of the Financial Services Council, called on the Government and the Opposition to guarantee SuperStream would be implemented by 2012.
“Pulling $20 billion of costs out of the superannuation system while at the same time significantly improving services will ultimately benefit consumers,” he said.
“The next government cannot delay the implementation of $20 billion worth of savings in superannuation. Any delay is not in the long term interests of funds, members or employers.
“We currently have the ludicrous situation where many small and medium businesses pay salaries electronically but pay super by cheque. Superannuation contributions need to be fully integrated with Australia’s payment infrastructure. We must have a system where employers can log on to pay salaries and super at the same time.”
The research also found that implementation of the measures could see fees rise across some sectors of the industry as funds with antiquated systems are forced to make big investments to upgrade their technology and as members consolidate their accounts.
“There are three superannuation accounts on average for every Australian. Many people have forgotten they have small amounts of money in super accounts from jobs they had 15 or 18 years ago,” Mr Brogden said.
Some funds expect account consolidation will reduce the number of accounts they have by up to 40 per cent without significantly reducing their cost base. For members with multiple accounts, consolidating those into one account will reduce their fees.
Graeme McKenzie, Ernst & Young’s Oceania Leader for Asset Management, said implementing the industry-wide superannuation reforms would require strong governance provisions.
“Industry has told us that they strongly support the SuperStream initiatives but these changes cannot be achieved in isolation. They want a governance body established with strong powers to ensure that
implementation is coordinated and successful,” Mr McKenzie said.
“Effective governance and legislative direction is crucial to the success of SuperStream as the efficiency of the superannuation industry is impacted by the behaviours of members, employers and the diverse nature of super funds. The success of the proposals will only be as strong as the weakest link in the chain.
“However, the winners of this process will be those who embrace the changing landscape of superannuation with an ability to manage the complexity of that change and maintaining focus on improvements and benefits for employers and members.”