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Employers unprepared for new default arrangements
Over half of Australian employers are undecided as to how to handle new default fund arrangements, according to an Aon Hewitt survey regarding the impact of Stronger Super reforms on employers.
Aon Hewitt senior consultant and actuary Ashley Palmer said the surprising result was compounded by the fact that only 12 per cent of employers intended to conduct a review to determine which default fund to choose.
"That's concerning, considering that companies will need to be able to contribute to their chosen default MySuper fund from 1 January 2014," he said.
Almost three quarters of respondents did not have a plan for an early transition to transfer existing default balances to a MySuper product.
The survey also found that 58 per cent of employers were yet to determine their response to the increase to the superannuation guarantee (SG).
The effect of the increase in the SG would be different depending on a company's remuneration approach, according to Palmer.
"Broadly speaking, those who use a remuneration packaging method may be passing the cost on to employees, while employers who use the base-plus approach will be bearing the increase themselves," he said.
Only 11 per cent of the 29 per cent of companies paying above the SG expected to continue to do so when the hike is introduced, whereas 32 per cent expected to absorb the increase.
Palmer said employers using a base-plus approach to remuneration were more likely to set aside additional funds to finance the SG in 2013, compared to 12 per cent using the remuneration packaging.
Companies that did not address the legislative changes could be hit with more than a headache, he said — it could lead to financial penalties, he said.
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