In the second of a six-part series on corporate superannuation, Mark Beyer looks at some of the issues employers need to address when reviewing their fund.
THERE is one question that employers keep asking Andrew Welch, managing director of corporate superannuation consultants AXIS Financial Group: “What should I be looking for in a good superannuation scheme”?
Mr Welch’s answer is simple: “Ask your staff what they want”.
“We recommend to our clients that they go out and survey their staff,” Mr Welch told WA Business News.
“Instead of trying to find a one-size-fits-all approach, companies should be trying to customise their superannuation.
“A survey can reveal what is really important to the staff, and that can vary enormously across different companies.”
Mr Welch said the staff surveys could help companies set the parameters of what they want from their super fund.
Once they have set the parameters, they are well placed to assess the many competing service providers in the market.
Some of the key issues on which staff surveys can shed light include investment choice and returns, insurance needs, member education and fees.
Mercer Human Resources Consulting executive director Peter Promnitz said member surveys consistently showed that communication was the top issue for fund members.
“What members most want is clear, simple communication so they can understand what they are getting,” Mr Promnitz said.
“A small proportion want advice, to be told what they should do, but the vast majority want education so they can interpret the information they receive.”
Mr Welch agreed that demand for member education was growing, and will continue in light of fluctuating investment returns and the increasing amount of money in employee ac-counts.
Another contributor is the trend towards using master funds that offer a wide array of investment choices.
This is a big change from the days when most people with superannuation were members of in-house company funds, and therefore had little investment choice, or were in defined benefit schemes and therefore were not affected by fluctuating investment re-turns.
Mr Promnitz said member surveys also revealed that most people want investment choice, though in practice 85 per cent of people do not exercise their choice.
Instead they leave their super savings in the ‘default’ investment option, which typically has a 70:30 split between growth assets (ie shares and property) and defensive assets (ie cash and interest-bearing securities).
Mr Welch said super fund members generally wanted easy access to fund information.
This can include online access to detailed account information.
He said insurance was becoming a more prominent issue, particularly for people working in higher risk industries such as mining, oil and gas and engineering.
The general tightening of the insurance market over the past two years has affected the cost and avail-ability of insurance for people working in these industries.
As a result, these workers may be attracted to a super fund that can offer cost effective and flexible insurance cover.
In contrast, white-collar office workers can readily obtain cost-effective insurance cover and therefore attach less importance to this feature.
The types of insurance cover offered by super funds generally include life, disablement and income protection.
Mr Promnitz said he had ob-served a trend toward freeing up of insurance structures so members can select their own level of insurance cover.
In practice, members tend to choose a level of cover that is less than the employer would have selected. Mr Welch said another consideration was the mobility of workers.
Wineries and mining companies, for instance, tend to employ large numbers of contract staff who move from job to job.
In these cases it may be appropriate to use an industry fund that can accept contributions from a wide range of employers.
These companies may choose to have a separate fund that is tailored to the needs of their permanent staff.
Mr Welch said companies planning to review their superannuation arrangements needed to recognise that many employees were sceptical of the value of superannuation. This highlighted the need for companies to offer superannuation schemes that meet the needs of their staff.
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