Do super funds need more time to prepare for Stronger Super?

 

Organisations such as the Association of Superannuation Funds of Australia have suggested super funds have not been given enough time to come to terms with the complexities of the Stronger Super legislation.

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Mike Taylor, managing editor, Super Review: Today’s central theme of the roundtable is of course Stronger Super.

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There have been a lot of suggestions made by organisations such as the Association of Superannuation Funds of Australia, or ASFA, and others, that there’s a lot of complexity in getting Stronger Super legislation in place.

Of course a lot of it is still yet to run through Parliament.

So, there is some concern that super funds are not being given enough time to get their houses in order, and to get across the technical elements of that. My question to the panel is, is the industry going to need extra time, and if so how much time?

And I’m going to start with the administrator here, Tim Buskens, because administrators usually face the hardest task. So Tim. 

Tim Buskens, head of industry initiatives, Australian Administration Services: Thanks Mike. I knew you’d start there.

I think to answer the question we need to break down Stronger Super into its component parts. We need to understand that there’s obviously the product side, being the MySuper, and the SuperStream side. 

I can only speak from an administration perspective in terms of the MySuper: we don’t perceive too much difficulty in the timeframes from system design, because APRA [Australian Prudential Regulation Authority] came out very early on talking about MySuper being an investment option, and it’s largely based around default arrangements.

As for the group, as you know we have focussed more on the industry fund side, and that sort of fits in nicely with that model.

On the SuperStream side, time will be an issue, and again we need to look at SuperStream in its component parts, and I’m not talking about necessarily the traditional way that we have spoken about SuperStream roll-overs and contributions.

 I’m talking about unpacking that even further and saying that the standard message that ATO [Australian Taxation Office] is looking to set up has three component parts: its data format, its messaging format, and its payment format.

And if we look at those elements, I think payments is basically looking at using banking arrangements – so EFT, most of us, in fact all of us, should do that now.

With the data format, I think there’s been a good engagement from the ATO across the industry. We’re close to and we’re seeking some of the regulations to come out on that, and we’re fairly comfortable from an administrator side around that.

So then to the data format. But the messaging format in the middle, that’s the piece that’s concerning, and that’s the piece about how we are going to move messages across our systems.

The ATO have got a 15-year vision here, they’re looking to implement right now a Taj Mahal, leading-edge messaging framework. We think to do that in nine months will be a struggle, the industry will struggle.

 However, we will have to engage with the ATO and say, “well, what are the other arrangements that we can work through to work off solutions that exist in the market, to be able to at least start achieving some of those SuperStream objectives over the next 12 months”.  

Mike Taylor, managing editor, Super Review: Gerry, you’re there with Media Super: from the perspective of someone who is going to the monthly trustee board meeting, what’s your feeling on that?

Gerard Noonan, chairman, Media Super: Well, the super industry, generally speaking, is pretty used to change.

Over the past decade there’s been no shortage of enquiries and recommendations for change – basically every budget there seems to be a change in tax regime.

So it’s not as though we’re not prepared for it, and it’s not as though with the Stronger Super process, or in particular the MySuper process, which is a formal registration process, that we didn’t know it was coming.

I must say, despite the doomsayers about this process, most of the funds that I talk to are a long way advanced in going through the preliminary process to getting their MySuper registration, and remember they had to become registered entities some years ago anyway.

That’s partly I think because the regulator, APRA, is being pretty intelligent about how it’s managing this. In other words it’s requiring people to try out their MySuper registration process first, before they actually go and, you know, reach a drop-dead date.

I think in general terms, certainly our fund is at the point of making an early submission, but a number of other funds that I deal with are in the same boat, that they are pretty far advanced on this. 

There are some technical issues. Tim was talking about some of the issues in relation to the messaging protocols, or some of the protocols under the SuperStream process being a bit complicated, but you know, we live in a complicated world, we’re pretty familiar with it. 

Mike Taylor, managing editor, Super Review: Alex Hutchison, you’re another super fund executive, what do you think?

Alex Hutchison, chief executive, Energy Industries Super: I think the MySuper changes are under control, so I agree with that. But I think the overall volume of change over the past few years has been significant.

You’re absolutely right, Gerard, in relation to the industry having constantly changed and evolved, especially over the last 12 years or so, from MIA onwards.

I think the volume of change and the breadth of change, all culminating essentially in an 18-month period, chews up a lot of time for trustees and for the management of business, and sometimes I think that makes you pause to think whether or not you are spending as much time on the day-to-day stuff, rather than necessarily getting caught up in the regulatory change.

So one observation I would make is that in the midst of the volume of change, whilst I agree it will be dealt with, and everyone will always deal with the change, it’s at what cost does it come both from a financial cost, and also on a day-to-day cost.

Because it’s not sometimes as easy as that, no matter how good you think you are.  

Mike Taylor, managing editor, Super Review: Russell Mason, as a consultant to the funds?

Russell Mason, partner, Deloitte: I think both Alex and Gerard have made very valid points. I agree with them, we’ve had a lot of time. I have worked with a number of industry and retail funds, at least three or four of those very closely, submitting their drafts.

 We don’t know exactly what APRA is going to say, but I think there’s plenty of time to put the drafts in now. Provided APRA give their feedback in a reasonable period of time, I don’t see the current timeframe from a MySuper perspective, being a great problem.

I think those funds that took it seriously from Day 1, that put the resources in, should reach the timetables.

 Like anything, if they left it till the last minute … and we heard this through the APRA licensing, “we haven’t got enough time, it’s unreasonable”. We always get through it, and funds will get through it this time around. 

I think Alex makes a very valid point, that it has distracted a number of funds from the day-to-day activities.

And it will be good to get the licensing process over so funds can go back to concentrating on many of the other strategic aspects of running a superannuation fund in the best interest of members.  

Mike Taylor, managing editor, Super Review: Frank, from an insurer’s point of view?

Frank Crapis, head of industry fund group insurance, CommInsure: From an insurer’s point of view, there are two key areas within the Stronger Super that impact the insurance: one is MySuper, and the second one is auto-consolidation.  

We’ve been working closely with our clients, and planning and organising to determine exactly how their MySuper product will look, from an insurance perspective, based on how the drafts are going and what the submissions are likely to be, and how the insurance design is likely to look.

From our perspective, the timing is okay to assist them in achieving that from an insurance perspective.

But we also need to be mindful that if some of those product designs get knocked back and they need to be repriced – because you know, definition changes, or for whatever reason – then that will have an impact on our timing leading up to 1 July.

The same goes with auto-consolidation: with auto-consolidation, based on what we know today, there is enough time, but we need to be mindful of it as it gets closer and as the proposals get bedded down: the impact to insurance may be there some of the time.  

Mike Taylor, managing editor, Super Review: Andrew, from the FSC’s point of view?

Andrew Bragg, policy director, Financial Services Council: I agree with what Gerard said before, which is really that none of these changes were a surprise to anyone, we’ve known about all the changes for the best part of four years.

So I don’t think there’s any surprise where we’re heading. Really, in terms of the 1st July 2013, that is a regulated day for the industry.

There’s obviously MySuper stuff, there’s the SuperStream elements, there is the governance changes, there’s prudential standards and then there’s a whole data collection.

We’re moving from 90 to 100 points of data, to a couple of thousand, which is much more of a situation you see in banking and insurance I think.

There’s other elements like the Australia New Zealand Super Harmonisation; it’s a lot of change coming on at the same time, and there’s only limited resources at any time to actually execute those changes.

So I think that compliance at this stage will be mapping out all those changes, and in terms of MySuper, which is what we can only discuss, that is achievable.

But really, all those particulars need to be bedded down, and when you’ve got four changes of legislation and regulations to come, that timeframe has moved to six months to commencement, you do need to have all those particulars passed in Parliament, and to be made into regulations, in at least six months. 

Russell Mason, partner, Deloitte: Andrew, so many of the changes before came in at the 11th hour.

So for most funds, MySuper should not be a big deal; I’m not saying for all, but people just simply fit in with their current default arrangements. It’s not perhaps quite as huge an exercise as some of the doomsayers would say it is, or as dramatic.

Andrew Bragg, policy director, Financial Services Council: I’m not suggesting it’s dramatic, I’m not being a doomsayer, but I think although we may have had licensing and other regulatory changes in the past, they’ve never been on the scale of … back-office changes and governance changes, and default fund product structure changes and data collections – all commencing and configured on the same day.

Gerard Noonan, chairman, Media Super: Mike, I do think that Andrew does put his finger on two particular issues. I don’t think we have really seen the edges of two, or perhaps three, of them. And the first is, the degree to which we are going to become data collection agencies for government might well stretch us, but that’s not yet.

The second is, I don’t think that we are quite used to an APRA, a regulator with such a big stick that it will have with its prudential standards in place.

We’ve been used to, you know, pretty close relations with a regulator from this industry, but the prudential standards do give a kind of a very long and heavy stick to APRA, and I’m not sure that we won’t find some chafing going on with that.

And thirdly there’ll be just the general marketplace, when we get this in place. It’s not as though things stop, there’s a marketplace out there and there’ll be lots of arm wrestles between different sectors, not only the sectors that are broadly speaking represented here, but with the self-managed super funds sector as well, for market share.

So it’ll keep us on our toes. 




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