Changes to super will reduce paperwork.

The coming three months will see Australian employers and their myriad of superannuation providers digest some of the biggest systems reforms since the introduction of the GST.

The joint employer and super industry effort will deliver Australians one of the most streamlined retirement systems in the world – enabling people to consolidate funds or change their provider in days without cumbersome paperwork.

According to Link Group (Link), Australia’s leading super administrator, the upcoming changes to electronic contributions and rollovers for superannuation funds will have the most transformational impact on Australia’s super system since the savings scheme was introduced.

As part of the wide ranging Stronger Super reforms, four key deadlines are looming for the industry and employers:

• From 1 January 2014, all APRA regulated super funds must process and fund a member rollover request within three days – rather than the current 30 days.
• From 1 January 2014, all APRA regulated super funds must be compliant with sending and receiving electronic rollover (eRollover) instructions.
• From 1 July 2014, all Australian employers with more than 20 employees will be required to send employee super contributions electronically (eContributions).
• From 1 July 2015, all Australian employers will be required to send eContributions resulting in 800,0001 employers potentially being affected by eContribution changes.

John McMurtrie, Managing Director of Link and chair of super administrators industry group, Affiliation of Superannuation Practitioners, said the industry was likening the impact of eContributions changes to the introduction of GST, fundamentally altering the way businesses interact with clearing houses, payroll systems, superannuation administrators and funds.

He said while many employers were already making super contributions electronically, anecdotal evidence suggests approximately half of companies across Australia still used some form of paper-based instructions.

“The changes signal a major coming of age for our superannuation system and now require the time and attention of all employers. After 20 years, the days of receiving employee contribution cheques with instructions written on the back of a pizza box or Post-It note are coming to an end,” Mr McMurtrie said.

He said the changes would substantially benefit all players in the long run, but in the short term the pressure was on super funds as well as employers to establish how they can best comply with the new rules while maintaining reasonable costs for members.

McMurtrie also suggested that the incoming Government reduce red tape by abolishing the $3,800 fine to be levied on employers who contribute non-conforming data.

Easing the transition

To ensure a smooth transition, Link is working closely with the ATO to pilot eContributions before 1 July 2014, minimising the impact to businesses while still ensuring the rigour and efficiency of digital contributions.

“As part of the consultation process, we are working with the Government and regulators to look at range of e-Contributions solutions. Many employers are already adopting a form of eContribution payments which may not be specifically compliant with new ATO standards. We believe these non-compliant systems, which effectively provide the same outcome, should be accommodated in order to minimise compliance costs for employers,” Mr McMurtrie said.

Link is the first administrator to be fully compliant with each wave of the new regulatory deadlines, making the industry’s first official eRollover transaction for AIMST, Christian Super and Russell Superannuation Master Trust under the new system on 26 August this year. Major super fund administration clients such as REST, CARESuper and Kinetic are also fully compliant with the eRollover requirements ahead of deadline.

Changes expected to awaken members

From 2014 Australians will also see major improvements in the ease with which they can change super funds – including the ability to switch funds online.

While prompting improved fund consolidation, the easier rollover processes may also see an increase in fund switching, and have coincided with some of Australia’s leading super funds redoubling their marketing presence in an effort to attract and retain members.

According to McMurtrie, changing or consolidating super funds has proved so cumbersome to date and conservatively estimate that more than half of people who embark on the process end up giving up before the process is completed.

“Members are fed up with the red tape around their super and we are pleased to be leading the charge amongst administrators to drive home reforms that will ultimately benefit every Australian – in particular the opportunity for people to feel more in control and to become more engaged with their super fund,” Mr McMurtrie said.

He said a more mobile member base would continue to put pressure on super funds to offer a best of breed suite of investment, insurance and other services – while still maintaining competitive costs.

McMurtrie also recommended that the complex, risky and very expensive Government initiated auto-consolidation program be dropped.

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