Any manager who has responsibility for an employer super plan should consider analysing it as a benefit, rather than a simple entitlement.
The challenge is not in the management of the employer’s responsibilities around contributions but in the actual management of the accumulated asset. Some managers would argue that employees can choose any product they want and an employer plan is simply a default option.
However, it is worth noting that society is somewhat more litigious nowadays and compensation costs are being paid more and more often by parties who initially maintained their innocence. In addition, it’s becoming more common for companies to pay substantial fines for not fulfilling their obligations.
The crux of the issue is often that super is an employer-funded entitlement and is thereby defined as a remuneration benefit, but management often views it simply as an entitlement. This needs to change. Medium to large –sized companies have buying power and have been able to negotiate discounted fees and premiums for decades, but there’s often very little focus on value.
Employers often appoint product providers and meet with them on an ongoing basis, but how do they assess performance? Super is complicated, and truthfully, even the most well intentioned employers are often duped by their product providers into thinking that their performance is competitive with the top end of the market, even when it is not.
If the employer appoints the product provider and then oversees the relationship over 10 to 20 years, are they inadvertently making a statement of satisfaction when closer scrutiny would be justified?
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Reports & Service Planning
AXIS has regularly become involved with employers in scrutinising the value being delivered by their current arrangement around their employees’ super. For most medium to large-sized employers, product providers provide at least one report and one service plan per financial year.
The analysis they present is designed to show the product in an advantageous light. Comparisons are carefully made to avoid raising concerns from clients as retention is their key focus.
Service plans as presented are noted as approved by the employer but there is usually an absence of key performance indicators and what the intended outcomes might be if the service plan is successfully executed. This is a disaster waiting to happen.
Your employee retention and motivation policy?
Most medium to large sized employers have many policy documents, in particular around the management of their biggest asset or liability, their people. Stability in any large workforce should be made a priority as it is a source of motivation. Conflict around employment issues can cause problems and employers would usually take advantage of any opportunity to ensure that their employees understand the balance between power and care.
When first employed, the key components of anyone’s financial package is their salary and their employer super contribution. Salary funds their current lifestyle and super will fund their lifestyle in retirement.
The majority of workers do not understand how to manage super as a personal asset and hence they tend to make decisions based on misleading information. As a remuneration benefit, employers should have a definition of asset management for super and what measures are required to optimise the value of the asset.
If such measures were in place, it would be a positive statement of value by the employer to their employee. If super is explained properly and also managed properly, it becomes a consideration when employees are considering employment elsewhere, thereby adding to the stability of the workforce.
Initial examination of your current arrangement
The first phase of the AXIS framework is examining your current arrangement and identifying what model your super provider is working to, thereby finding out the true value being delivered.
In gaining an understanding of what you now have compared to what you thought was being delivered, you will have a choice to make on which service model you prefer and the difference it can make.
Queries & Questions
Should you wish to provide feedback on this publication, please connect with me on LinkedIn. I am Harry Burke, MD of AXIS Financial Group and also Super Simpler Pty Ltd (Owners of SuperWiser, our individual client portal).
Should you want to discuss your current arrangement around employer super, please contact Roy and Richard by emailing consulting@axisfg.com.au or by calling 1800 111 299.
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This document was prepared and issued by AXIS Financial Group (ABN 21 092 889 579, AFSL 233680). The information contained within it is not advice. It provides general information only and does not take into account your individual objectives, financial situation or needs. You should assess whether the information is appropriate for you and consider talking with your financial adviser before making an investment decision. Information in this publication, which is taken from sources other than AXIS Financial Group, is believed to be accurate. However, subject to any contrary provision in any applicable law, neither AXIS Financial Group, nor its employees and directors, provide any warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it.
