A $1 billion investment by the superannuation industry in the back office systems of all funds in Australia is expected to give a $20 billion return to the industry over the next 10 years, according to research from the Financial Services Council (FSC).
At its conference yesterday, the FSC announced its plans for the implementation of the Cooper review’s SuperStream recommendations.
The bulk of savings would come from making electronic transactions mandatory, and straight-through processing.
“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,” FSC chief executive John Brodgen said.
“We must have a system where employers can log on to pay salaries and super at the same time.”
The FSC recommendations draw on research by Ernst and Young, which found there were three superannuation accounts on average for every Australian. Many people have forgotten they have small accounts from jobs they had 15-18 years ago.
The research also found that implementing SuperStream 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.
According to Brogden, the retail sector is more ready for the changes than the industry sector.
“Funds that have not invested in IT will see a radical effect. We may see funds putting their hands up to merge because the cost of moving to SuperStream will be prohibitive,” he said.
Some funds may lose money when small balances of members are drawn out and consolidated with their other super monies. However, it will also clean up their books.
“Implementation of SuperStream is a great way to break down the barriers between the sectors of super – retail, industry and corporate and government funds. Barriers should become increasingly irrelevant from where I stand,” Brogden said.
“Within a few years we want a system similar to that operating in private health insurance where members changing out of one fund to another have their information transferred to the new fund within 28 days.”
The FSC would like to see the new SuperStream system operating from 2012, starting with standardised contributions and mandatory electronic transfer payments enabling straight-through processing, and finally by extending the use of tax file numbers and increasing the frequency of contributions.
According to Brogden, the successful implementation of SuperStream and the Future of Financial Advice reforms would negate the need for MySuper, which the FSC continues to oppose.
