The Federal Government spending $16 million over three years on a superannuation clearing house is not much more than a “great start”, in the words of InvestmentLink chief executive Peter Philip, with lots of heated debate to come over how such a facility should be structured, and whether one is in fact really required at all.
The Government has flagged a period of much-needed industry consultation before the July 1 2009 start-date, but has specified that usage of the clearing house will be optional, that it will be supported by the Australian Tax Office but contracted to the private sector, that businesses will be ‘in the clear’ vis a vis their obligations to an employee once a payment of the correct amount has been lodged with the clearing house, and that the facility will be free for small businesses with fewer than 20 employees but attract an ambiguously phrased “service fee” for larger users.
Philip makes the entirety of his position on the issue pretty clear. “We feel that [InvestmentLink’s clearing service SuperChoice] is the leader in ecommerce for contributions processing, and we’re well advanced in discussions with the industry around cementing that position.” In short, Philip believes SuperChoice is already the dominant contributions clearer for Australia’s large corporate super funds – among the 1.4 million members on whose behalf it directs SG payments are those with AMP, Mercer, ING, Axa, Asgard, IBM/Russell and Australian Administration Services – and the Government should contract the new clearing house initiative to it.
InvestmentLink’s current focus on speaking to all the member administrators about connectivity reflects the widely held industry belief that for a mandated clearing house to work, it must enjoy buy-in from all the major players. Prior to its days as an ING subsidiary, administrator Citistreet released a white paper supportive of a clearing house, but said its success would hinge on the major players within those major players being directly involved. “Common to [successful cases of consortium-driven financial services reform] was senior executive sponsorship from the key industry players. This level of involvement was a catalyst for breaking down the barriers and mind-sets that often occur in lower levels of management against change,” Citistreet said.
Member administrators worked together successfully five years ago, points out former Superpartners boss turned admin consultant, Frank Gullone, around the development of funds transfer protocols which helped raise service standards, partly because they made it easier for clients to change administrators. With transfers out of the way, Gullone believes the three additional processes which should be standardised – by way of a clearing house or not – are contributions, benefit payments and applications (such as a salary sacrificed voluntary contribution). Gullone estimates that between 45 per cent and 60 per cent of an administrator’s costs are consumed by this trio. There is clearly much to be gained from standardising how they occur, and Gullone says it should be done in a way that maximises member accessibility by minimising industry jargon, and makes sure that any new template forms allow imaging systems to work at their best.