Choose choice - Finding new solutions for new problems

We’re nearly there, the choice era is about to begin. Employers are already receiving standard choice forms for their employees — through which, according to the Association of Superannuation Funds of Australia’s research, around 8 per cent of Australia’s employees will exercise their right to choose their super fund.

If, as has been suggested, 40 to 50 per cent of those moving elect to shift into self-managed super funds (SMSFs), the industry could be making contributions to more than 200,000 SMSFs within a few short years.

This raises the very real prospect that employers could be paying into several dozen different accounts, with different methods, routes, protocols and manual tasks. New contribution payment solutions will be needed, to accept all manner of payments, process them and pass the information on to administrators who have yet to deal with them and adjust to their reporting methods. Amid this increasing complexity, there will also be the legal issue of who is liable when things go wrong.

In short, there is a growing realisation that administering choice of funds will be a major issue for employers.

To quantify employers’ specific areas of concern, Australian Administration Services (AAS) recently surveyed 100 businesses of varying size — and the results indicate that ease and flexibility of making payments are important issues to the majority of employers.

In fact, when we asked business to consider the importance of various factors in choosing a default fund, ‘ease of making payments’ ranked as the most important factor, with 88 per cent rating it as ‘somewhat’ to ‘very important’.

Significantly, ‘existing relationships’ scored lower, at 83 per cent, and ‘returns’ ranked lower still, with 75 per cent of businesses considering it ‘somewhat’ to ‘very important’.

Given this, the natural assumption is that the burden of administering choice will be the catalyst for employers to look for a provider with a clearing house to help administer their contributions.

In our research, almost a quarter (23 per cent) of businesses surveyed indicated that they were ‘unsure’ or were ‘looking for alternatives’ for paying their super garantee contributions in the post-choice era.

But will clearing houses help, or hinder the burden of choice?

In our survey, 50 per cent of employers indicated that they would continue to remit contributions via cheque. For this reason, a clearing house solution needs to be flexible and be designed around the users’ needs.

At AAS, SuperClear clearing house solutions allows employers to submit and pay contributions electronically or via an ancillary facility that allows employers to generate contributions forms that can be remitted by the employer direct to choice funds using cheque, electronic funds transfer, direct debit or BPay payment methods (where supported by the fund). It is likely that future developments will allow employers to issue one cheque for all contributions.

In an effort to streamline the process further, AAS’ SuperClear also enables the data for its funds to be submitted through a single log-in, regardless of how many funds need to be dealt with.

In future, online clearing house facilities will need to have the capacity to carry out other functions such as processing small businesses’ payrolls and health care payments through one channel.

From the AAS point of view it was important that SuperClear adhered to the industry’s swimEC (superannuation, wealth and investment management electronic commerce) standard, that allows employers to electronically transfer super contributions to the participating super funds.

Clearing houses might be a hindrance in some areas — but as AAS’ research shows, it’s something that employers want and need. Solutions like our SuperClear service will mean that, come July 1, our clients will definitely provide their employers with the help they need.

Stuart Korchinski is the chief executive officer of Kaz