For many years, large employers have leveraged their scale to secure better superannuation arrangements for their employees. These can drive better retirement outcomes, and provide a key employee benefit and value proposition. From reduced fees to tailored workplace insurance, employer-supported super plans can offer significant benefits to employees.
But, the continuation of these benefits could be at risk with the government’s super stapling reforms.
One of the important recommendations for the superannuation industry from the Hayne Royal Commission is that consumers should have one superannuation account - rather than being automatically defaulted into multiple accounts over the life of their careers. It's a scenario that currently sees some 850,000 new accounts created for members who already have a super fund each year.
Under the new Your Future Your Super reforms, if an employee does not nominate an account when starting with an employer, their employer will pay their superannuation contributions to the employee’s ‘stapled’ fund – that is, their existing default fund. The intention is to avoid the creation of multiple accounts and reduce unnecessary fees when people change jobs.
We can all agree that multiple unintended accounts are typically not in members’ best interests. The benefits of a single superannuation fund for members (unless they deliberately choose otherwise), will improve efficiency within the industry and provide individuals with increased retirement benefits.
But some concerns around fund stapling have also received their share of commentary. A key concern is that, be it through changes through occupation or personal circumstances, the death and disability insurance of an individual’s first fund may not be suitable later in life.
What’s received less airtime has been discussion on what these reforms mean for new employees where employer-supported super exists, and benefits they may lose out on.
The advantages to employees of negotiated plans between employers and funds make these arrangements some of the most competitive in the industry. Organisations use superannuation as a benefit to attract and retain talent, whether through contributions above the Superannuation Guarantee, subsidised insurance or fees, or greater access to services such as financial advice. All benefits that provide unquestionable value for members.
Going forward, employers must, then, have an opportunity to educate and inform new employees about the benefits of these arrangements without falling under the banner of financial advice or recent regulations relating to financial products, that is, anti-hawking, and design and distribution obligations.
The 2021 Edelman Trust Barometer, an annual study of the levels of trust that Australians have in various institutions, proved employers to be the most credible source of information over the likes of government and the media. For many employees, employers already act as trusted resources for employees. Employees are constantly engaging with their workplace on matters such as salary sacrificing, workplace expenses and tax deductions, and HELP repayments for new graduates in the workforce.
So, why should superannuation be any different? Employers are clearly well-placed, as trusted sources and in many ways financial partners, to be informing their people about their retirement savings. And while it’s important they don’t overstep the line and start providing financial advice to their employees, it’s equally critical that employers aren’t excluded from these conversations either.
By explaining their tailored superannuation plans to their employees, employers might just crack the great member engagement puzzle, leading to individuals becoming more educated and proactive when it comes to their retirement wealth.
And that’s something none of us should discourage.
Let’s hope the Your Future Your Super reforms don’t have the unintended consequences of stifling member engagement or detracting from the value members receive through employer-supported superannuation.