It is probably nothing on the ‘default funds in awards’ debate, but responses to the Rudd Government discussion paper on a national superannuation clearing house and improved framework for reducing ‘lost’ accounts revealed some deep divisions among industry players.
SuperChoice, which is already the country’s largest clearing house, handed in a proposal which retains an element of current industry practice, in that it allows a multiplicity of providers such as banks and payroll offices to continue competing for contribution capture work from employers.
However under SuperChoice’s model, it would become the central data exchange to which all those contributions were transmitted, and the so-called ‘Superannuation Industry Exchange’ (SIX) would carry out the subsequent validation, clearing, reconciliation, aggregation and distribution of the monies, acting as a single source of truth.
“This hybrid model combines the industry scale and manageability of a single infrastructure along with the wide distribution and employer value-added capability of a multiple provider model, with minimum disruption to current market norms,” the submission says.
SuperChoice sees the SIX evolving beyond choice transaction validation and clearing services to perhaps become an automated rollover hub, or support a lost or multiple member reunification framework.
SuperChoice says the SIX should be industry-owned and governed, and be able to interface with a “variety of communications protocols”.
There is a faint echo of Superchoice’s proposal in that from the Association of Superannuation Funds of Australia (ASFA), which says that all existing clearing houses and payroll systems should be permitted to perform their current functions, but with reference to an industry-owned and operated “central data exchange” to which all funds would be required to provide and update information.
The ASFA proposal says an industry-standard electronic format for accepting and delivering contribution information and payments should be an operating condition for every clearing house.
The AIST, meanwhile, has come out against the need for any centralised clearing house at all, but has backed AusFund’s proposal that it be the default national ERF provider.
The centralised clearing house would be irrelevant to a major source of higher administration costs – small businesses which remit by paper – and according to AIST, those businesses large enough to run a payroll system are already able to electronically transact with multiple super funds through those facilities.
It does admit the upfront validation promised by the centralised clearing house is an attraction, but argues it can be achieved by other means.
AIST’s submission derides clearing houses, arguing their typical business plan depends on delaying the payment of employer contributions to the destination funds, so that a ‘turn’ may be taken on overnight money markets, with a sizeable opportunity cost borne by fund members.
The “interposing” of a monopoly clearing house between funds administrators and employers would “seriously impact on their current capacity to interact to resolve issues around contribution payment”, the AIST submission says. It also suggests APRA’s current power to audit administrators be extended to a power to licence them, with the capacity to transact electronically and efficiently a licence condition.
AIST says many of the benefits of a central clearing house could be replicated by three measures: the development of standardised, mandated contribution protocols for employers large and small; a tightening of regulations such that an employer’s SG obligations were not met until correct monies had been paid to an employees’ correct fund, not merely the clearing house as applies now; and permitting employers to use Tax File Numbers as the main identifier on contributions they remit, and building on the ATO’s existing database as the industry’s ‘central data exchange’.
The latter will not help the masses of ‘lost’ super accounts with no TFN attached – as applies to 70 per cent of the 1.88 million members of Australia’s largest eligible rollover fund (ERF), AUSfund – and in its submission, AUSfund points out that cross-fund matching will remain vital (it boasts that its 2008 cross-matching campaign assisted over 100,000 members to reclaim almost $40 million of their lost super).
Out of the 16 ERFs currently operating, AUSfund points out that it holds by far the highest proportion of the 6.4 million accounts currently ‘lost’ throughout Australia, and appointing it as the ERF responsible for managing Australia’s lost super problem would allow the super industry to continue to deal with an organisation with which they were familiar.