The Top Super Funds survey published in this edition of Super Review should bring home to readers just how quickly the super landscape is changing and the manner in which this change is being driven by the combined influences of the Financial Services Reform Act and the licensing of trustees.
What our research shows and what is confirmed by the contributions made by Towers Perrin, Mercer and MLC is that a serious consolidation has occurred within the corporate super sector, with many fund trustees deciding that competitive pressures plus a more exacting regulatory environment means it makes good sense to outsource.
The research also shows there is no common formula when it comes to outsourcing. Some funds have opted to simply outsource one or two functions, while others have outsourced entirely and, as a consequence, have virtually disappeared off our radar screens.
The winners in the process have undoubtedly been the master trusts and one or two of the major industry funds. It is probably too early to determine whether the fund members affected by the outsourcing are also winners, though the odds are that the vast majority are going to be no worse off.
What is hidden in the raw data, however, is the reality that what has happened over the past 12 to 18 months has been nothing short of a fundamental change in the way Australia’s companies do business and relate to their employees.
Gone are the days when employees of the Acme Widget Company could expect their super contributions to flow into the Acme Widget Fund — a fund run by trustees who were company employees.
Today, the Acme Widget Fund, if it still exists at all, is most likely just a façade for a master trust.
Ultimately, of course, outsourcing is very often the most sensible option. None of the employees of the Acme Widget Company will thank their employers or fund trustees ifthe fund underperforms or offers inadequate service. Nor are the regulators in the business of offering dispensations to trustees or funds which fail to meet their regulatory obligations.
In other words, outsourcing is a sensible response for trustees confronting a more challenging regulatory and competitive environment. The question over the next 12 months will be the degree to which the trend continues and how it will impact the Super Review Top Super Funds survey over the next 12 to 18 months.
Mike Taylor
Editor
