AUSTRALIA - The key challenge on the agenda for Australia's corporate super funds is whether to invest in member services and compliance, or move to a master trust or industry fund, according to new research by Mercer Human Resource Consulting.
Mercer’s 2002 Global Defined Contribution Survey found that 27% of corporate super funds surveyed are planning to move to a master trust in the next two years.
The survey findings report, Success Strategies for Australian Accumulation Super Plans and Master Trusts, covers responses from 231 Australian superannuation funds.
David Anderson, a principal with Mercer said: “Many activities are outsourced by super funds already, particularly administration and member services. However, in the next one to two years many corporate funds are considering closing altogether or merging with another fund.
“Most corporate funds are rethinking their future largely because of the economies of scale needed to meet new member service benchmarks set by master trusts and the investment required to comply with increasingly complex licensing and regulatory requirements.”
The survey found that larger funds, typically with 5,000 members or more, are also thinking about outsourcing. While many of these funds will remain intact, 18% of corporate funds surveyed are considering introducing implemented investments, 17% are seeking a solution to the Financial Services Reform licensing regime, another 17% are considering merging with another fund and 8% plan to outsource the trustee function.
“There are large organisations that see value in outsourcing their entire super arrangements, such as the 14,000-member Coles Myer staff super fund which recently decided to move to the Mercer Super Trust,” Anderson said.
“Others see value in maintaining their own trust while outsourcing key functions, such as investment strategy implementation, or licensing under FSR.
“Another particularly positive finding suggests that even when outsourcing some or all of their superannuation arrangements, Australian organisations have the best interests of employees at heart,” Anderson added.
The survey found 83% of respondents rated creating “value for employees” as the most important success factor for their super fund. Second in the success stakes was benefit adequacy for employees, at 73%. Both of these success factors were rated ahead of other success measures, including cost effectiveness.
Mercer’s global DC survey was run in 10 countries during April and May 2002. It received responses from 1,655 organisations (including 324 multinationals), representing more than 7 million members and over US$270bn (AUS$480bn) in retirement plan assets.
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