Orica Group Superannuation Fund, which has assets of around $550 million, is the latest in a line of large corporate super funds to look at taking the complete outsourcing leap, following in the tracks of funds from groups like OneSteel, Boral and Optus.
The large size of the funds taking the plunge was inconceivable a few years ago, but now it’s hardly surprising, given the never ending pressures super funds face. The latest are the need to comply with the Financial Services Reform Act and to cut costs and improve services (at the same time) to meet members’ growing expectations.
And, it’s not just corporate funds that are feeling the heat. Our cover story (see p24) outlines the many challenges faced by industry funds and the trend for them to amalgamate or form alliances in order to bolster their economies of scale.
Still, if the Superannuation Working Group’s draft recommendations on Options for Improving the Safety of Superannuation (see p40) are any guide, the journey is about to get tougher.
Few funds, it would seem, have actually had the time to analyse the 29 recommendations. Nonetheless, a survey by Towers Perrin (see p6) found that many believe these proposals go too far and that adequate risk management systems are already in place anyway.
According to Corporate Super Association CEO Nic Brookes, there is “seething resistance” to the recommendations. He believes that if implemented, they will just add extra costs and complexity to the business of running super without bringing any benefit because they do little to address the real safety issues affecting super.
The proposals call for additional APRA licensing, but as we repeatedly hear, failed funds like Commercial Nominees were already licensed. What is also of much concern to many is the recommendation to grant APRA additional powers to issue prudential standards without recourse to Parliament.
But funds that have had enough may find that it’s not that easy to just outsource their super. BHP Steel may have done ample research, but its decision to outsource to Towers Perrin’s SuperSolution offering has met with union resistance, forcing it to give members the choice of also going into an industry fund.
Some employers may dismiss industry funds as blue collar/union organisations, but it may well be that the BHP Steel saga signals the start of intensified pressure from unions and their representatives on trustee boards to ensure that industry funds do get a fair hearing during outsourcing tenders.
