Where do you start when everything in super is changing?
There’s a record number of ideas swirling around for changes to superannuation. There are a lot of problems to be fixed and a lot of good ideas about how to fix them.
But how do you plan a program of change when there is so much going on, and so little certainty about how it’s all going to end up? If it’s this confusing for the super industry, spare a thought for the poor consumer.
There’s lots of legislation before the Australian Parliament, the Productivity Commission has a long shopping list of superannuation issues, and the Government issues new proposals for change on a regular basis.
At least four lots of insurance changes are being proposed:
Let’s just drill down on insurance in super as an example and think about how to best respond.
The super industry has issued an insurance code of practice and is working with funds to encourage its adoption. A parliamentary committee has handed down a host of recommendations about life insurance, including super in insurance, but didn’t think the code went far enough.
The Productivity Commission has made a series of insurance recommendations in its voluminous superannuation report, including that the code didn’t go far enough. ASIC and APRA are working on a claims data project, but both have publicly concluded that the code didn’t go far enough.
The Government announced changes to insurance in super in the Federal Budget and have released legislation to make this happen – because they don’t think the insurance code went far enough and they don’t think that young and casually employed consumers are getting a fair deal.
Now, unfortunately, not all these proposals are the same and some of them are inconsistent. Some parts of Government want to replace the code with legislation, while others want the code to be mandatory. This places super funds who want to implement changes to improve things for members in something of a quandary. What to do next?
Super funds should avoid shadow-boxing:
The answer is, you concentrate on those changes that have certainty and specificity about them, and don’t let yourself be distracted by people running ideas up the flagpole to see if anybody salutes them.
They might be good ideas but that’s what the Productivity Commission, for one, is doing. It will be much later this year before the Commission hands down its final report, and probably next year before the Government responds. They might respond to some, all or none of the Commission’s recommendations. The world is full of Productivity Commission ideas that are gathering dust.
Even if the Government does proceed, who knows what will happen in the byzantine world of Federal Parliament – especially the unruly Senate. The same goes for the Budget changes and the parliamentary committee recommendations.
On the other hand, super funds are putting together transition plans for the insurance code and are working with insurers and administrators on how to make change happen. These will be in place by the end of the year, and some funds are even moving forward much faster.
There’s a lot of work involved in implementing the code. It will be complicated and expensive, but it will also be comprehensive and directly lead to better member outcomes. The smart money is on this process being the one that will actually lead to the biggest, best and most sustained outcomes.
Funds developing a comprehensive program of work for the insurance code, cross-referencing the myriad requirements, who have a clear roadmap for moving forward and who are not distracted by the latest headline or Government announcement are going to be the winners here.
Written by David Haynes