Companies unprepared for new default arrangements
Over 50 per cent of companies are yet to decide what to do about 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 it was a surprising result, which was compounded by the fact that only 12 per cent of employers intended to conduct a review to determine which 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," Palmer said.
"Our experts at Aon Hewitt are increasingly being asked by organisations to undertake independent reviews of their arrangements focusing on compliance and competitiveness," he said.
Almost three quarters of respondents were yet to consider an early transition strategy to transfer existing default balances to a MySuper product, it said.
The survey found that 58 per cent of employers were yet to determine their response to the superannuation guarantee (SG) hike.
Palmer said the effect of the increase in the SG would be different depending on a company's remuneration approach.
"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.
Of the 29 per cent of companies currently paying above the SG, only 11 per cent planned to stay the same amount ahead of the minimum when it went up, 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.
The legislative changes could lead to financial penalties for companies that did not plan to address them, Palmer said.
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