A significant number of Australian employers are yet to fully assess the impact of the upcoming Stronger Super reforms on their operations, and more than half don’t have a plan in place to ensure compliance, a new survey has revealed.
This is despite the fact that, for many organisations, the new regime is likely to change key aspects of their business, including remuneration packaging, how much superannuation they intend to pay and selection of a default MySuper fund.
The survey, the first to directly address the effect of the Stronger Super reforms on employers, was conducted by Aon Hewitt, and its findings compiled in the Australian Superannuation Pulse Survey Report. This looks at how over 160 small, medium and large Australian companies plan to respond to the Stronger Super reforms.
The report findings were discussed in detail at Sydney and Melbourne seminars hosted by Aon Hewitt, subject matter experts across superannuation, reward and insurances. The focus of the session was how employers can be both compliant and market competitive under the new rules. Further seminars will be held throughout Australia in the coming weeks.
Topics for discussion included how to fund the mandated increases in the Superannuation Guarantee, the introduction of MySuper default funds, employee reward structures, insurances and changes to concessional limits. Attendees were given the opportunity to ask questions and have them answered by Aon Hewitt’s panel of experts.
According to Aon Hewitt Senior Consultant and Actuary, Ashley Palmer, from an employer perspective, superannuation is an expensive and highly regulated component of an employee’s benefits package. As such, whenever changes are introduced employers need to make a number of often complex decisions.
“The results of the Australian Superannuation Pulse Survey Report give a snapshot of the challenges that many companies are facing and the strategies that they have in place to manage them,” he said.
Mr Palmer explained that the objective of the seminar was to share the results of the survey in order to help Australian employers understand and prepare for what lies ahead.
“On one level, employers understand the need for compliance, but at the same time don’t have all the information they need to make informed decisions. They also don’t necessarily know what other organisations are doing and thinking,” he said. “We wanted to share our insights into this, as well as to highlight current trends.”
Mr Palmer continued by pointing to some of the specific challenges for employers.
“Just one example is how employers intend to approach the increases in Superannuation Guarantee starting from 1 July 2013 and eventually reaching 12% in 2019. The effect will be different depending on a company’s particular remuneration approach. Broadly speaking, those who use a Remuneration Packaging method may be passing the cost on to employees, while employers who use the Base Plus approach will be bearing the increase themselves,” he explained.
“In addition, of the almost 30% of organisations currently paying over the Superannuation Guarantee, only 11% say they intend to stay the same amount ahead of the minimum when the increase hits. The approach taken this year may set a precedent for future increases.”
Mr Palmer went on to explain that, due to the introduction of the ‘MySuper’ default superannuation regime later this year, companies need to make an active decision on their default fund.
“The surprising finding here,” he said, “is that over 50% of companies surveyed have not yet decided what to do about choosing a default fund, compared with only 12% that intend to conduct a review to determine which fund to choose. That’s concerning, considering that companies will need to be able to contribute to their chosen default MySuper fund from 1 January 2014. Our experts at Aon Hewitt are increasingly being asked by organisations to undertake independent reviews of their arrangements focusing on compliance and competitiveness.”
Mr Palmer concluded by saying that legislative changes to the superannuation regime can cause headaches or worse, such as financial penalties, for companies that don’t have a plan to address them.
“The Australian Superannuation Pulse Survey Report was conceived to pinpoint the issues and provide information on its practical effects to help employers prepare,” he said.
Australian Superannuation Pulse Report key findings:
- Of the 29% of organisations currently paying above the Superannuation Guarantee (SG), only 11% intend to stay the same amount ahead of the minimum when the SG goes up, whereas 32% will absorb the increase by foregoing the above-market position they currently maintain.
- Employers using a Base Plus approach to remuneration are more likely (40%) to set aside additional funds to finance the Superannuation Guarantee increase in 2013 compared with only 12% of employers using a Remuneration Packaging approach.
- 58% of organisations say they are yet to determine their response to the Superannuation Guarantee increases beyond 2013.
- Only 12% of organisations intend to commence a review to determine which MySuper fund to use as their default fund. Over half (52%) are still deciding what to do.
- Almost three-quarters (74%) are yet to consider an early transition strategy to transfer existing default super balances to MySuper.
