While the turmoil in Federal Parliament and the Financial Services Royal Commission were getting all the headlines, other low-key but very important changes had the biggest impact on super funds in 2018 and will again in 2019.
Productivity Commission Report Not the Main Game
Opinion polls have been pointing to the ALP as the favourite to win the next election. Either way, the priority of the Government after the election is going to be on implementing the recommendations made by the Financial Services Royal Commission. The recommendations made by last week’s Productivity Commission’s report on superannuation are going to have a lower priority, although they will continue to influence the policy debate.
Many of the Productivity Commission’s recommendations echo the draft recommendations they made last year, many of which have already been picked up by the Government or incorporated into the Insurance in Super Code. Their signature recommendation of allocating new entrants to the workforce one of ten “best in show” funds (unless they choose an alternative) is a political hot potato that probably won’t be implemented.
Royal Commission Report Set to Dominate the Policy Debate
The Financial Services Royal Commission will issue its final report right on time on Friday, 1st of February 2019, and the Government will make it public immediately. Whatever recommendations are made by the Royal Commission, it is highly likely that both the Government and Opposition will commit to implement all of them after the election.
My prediction is that the Royal Commission will recommend:
a ban on “grandfathered” trailing commissions;
more litigation and less negotiation with companies that break the law;
a new superannuation regulator;
a new or increased focus on conduct regulation;
a large number of prosecutions arising out of their case studies.
All of this is going to take a while to put in place. Legislation is not likely until the end of 2019 and implementation will take place from 2020.
In the meantime, the larger industry funds are experiencing higher than forecast member and contribution flows as they are perceived to have fared much better than their retail competitors at the Royal Commission.
While the superannuation world waits for changes arising from these high-profile commissions of inquiry, the APRA Outcomes Assessment Test, the Insurance in Super Code and re-engineered super fund reporting to the ATO are requiring major investments from funds and are already driving major changes.
New APRA Test, ATO Reporting and Insurance Code the Real Drivers of Change
APRA Outcomes Assessment:
APRA released a package of new requirements for APRA-regulated super funds in December 2018 intended to strengthen the delivery of quality outcomes for fund members. The key change is an annual outcomes assessment, requiring funds to annually benchmark and evaluate their performance in delivering these outcomes as part of their business planning cycles. Not only will this lift standards in super, it will also facilitate the merger of poor performing funds into better performing funds.
New ATO reporting:
New systems for super fund reporting (known as the MATS and MAAS projects) to the ATO will require funds to report on a near real-time basis, thus helping to identify employers not meeting their obligations. This will massively increase the volume of information being sent to the ATO and will mean that myGov and new online commencement forms will have much more comprehensive and up to date information.
Insurance in Super Code of Practice:
Most super funds are in the process of implementing higher standards and quicker claims processing for their members as part of implementing the Insurance Code. Many of the changes in the PYS legislation and recommendations made by the Productivity Commission were already incorporated in similar requirements of the Insurance Code. This includes the cessation of insurance cover for low account balance members and opt-in insurance for many younger members.
IQ Group is Here to Help
The IQ Group is keeping abreast of all these changes and is both mapping their impacts for many of our clients and designing and implementing solutions that improve the member experiences.
Six Tips for Running a Smooth Superannuation Fund Transition Project.
Superannuation fund transitions come in many shapes and sizes. This could include changing funds (successor fund transfers), changing administrator, changing administration platform or any combination of all three. Each has its own challenges. What works for one may not work for another. Ultimately, there are no hard and fast rules to follow. Most projects will follow a standard process, like locking down scope and managing change. However, when it comes to transitions projects, there are several key considerations that can make the process smoother.
IQ Group has played a fundamental role in many major fund transitions over the years. From our wealth of experience, we have compiled our top six tips for rolling out a smoother transition:
Accept that some things will be better, some will be worse and most will be the same.
This is true for all transitions – yes, even in a successor fund transfer. This is a mantra that everyone involved should be chanting to themselves every day, especially when stress levels are high.
There is no perfect fund, administrator or platform. Each comes with its own strengths and weaknesses. It’s not realistic to expect everything to be at least the same or better. Ensure you’re really taking the time to question the impact of anything you consider a backwards step. While something may seem important, ask yourself:
Do you really need it day one?
Are there things that could mitigate the impact that you can live with in the short term?
Is this worth focusing on and taking time away from other activities?
Is it really a backwards step, or is it just another valid way of getting to the same result or outcome?
Subject matter experts are vital.
Subject matter experts (SME’s) are some of the most difficult people to source, but they are an invaluable resource during a transition project. While their time may be in short supply, do what you can to get them. You will need SME’s for the whole duration of the transition project (and sometimes afterwards as well). A transition project will only get so far without them.
During their time on the project, ensure you pair the SME up with someone who can learn from them. You may not consider this to be a priority, but once your transition is live, the SME will move on to the next big thing and you’ll need someone around who can assist with the inevitable post-transition issues.
In addition, try to document as much as possible and in a “generic” way so that it can re-used in future transitions.
Know your processes and why you do things the way you do.
Some of the most frustrating words you can hear are: “we do (x) this way because that’s the way we’ve always done it” or “I don’t know how (x) works, why can’t you look at the system and see what it does”.
If a company doesn’t understand its processes, why they’re done that way or what the intention is, you need to ask:
How do you know if it’s being done correctly?
How do you know if it’s meeting the objective?
How do you know if there really is a difference?
How do you know if there isn’t a better way of doing it?
The approach should be to get equivalent outcomes not like for like. The most important thing to aim for is the outcome. How you get there is less important sometimes. There may be better ways of doing things, or even just different. Don’t focus on the process because it may cause you more time delay and costs than you need.
Know your Business Rules and Information.
Knowing your fund rules is just as important as knowing your processes. You need the information right at the start of the project. Delays in getting the information will almost always result in scope creep at best, and delays to the go live date at worst. The rules need to be clear and complete. If they’re not, there will be lots of questions raised that will eat into the limited time you have for your SME’s.
Assumed knowledge is the curse of many projects, none more so than during a transition. Not everyone has lived and breathed superannuation for decades or will come to the project with the same experience and background that you do. Try to take a step back and consider what the people working on this project may not be aware of. However, don’t get hung up on detailing every single piece of minutia – overkill can sometimes be worse than assuming. Try and find the appropriate middle ground. Do this by asking questions, find out what people do and don’t know and provide relevant responses. Strong communication between all those involved is key.
Expect Data Quality Issues.
If there is one problem that you can expect during a transition project, it’s going to be a data issue. As you come across these issues, deal with them pragmatically. The correct response is not always black and white. Be flexible. Sometimes you will want to fix them at source, sometimes you will fix them at target and sometimes you just need to let it be. Often, the 80/20 rule will apply (you know, where 80% of the outcome will be achieved during the first 20% of effort and the remaining 20% will take 80% of the time). Be pragmatic and flexible in your approach.
If your business is looking to run a transition project, IQ Group’s experts are here to help. To find out more or reach out, contact us at firstname.lastname@example.org.
Written by Luigi Gandolfo, Senior Consultant Business Analyst