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Standardisation is not necessarily the panacea for all the superannuation industry’s administration woes and, if implemented rashly, it could leave millions of Australians either underinsured or uninsured, according to SuperChoice Services general manager Mike Fielding.
Fielding issued the response following the publication of comments made by the review chairman Jeremy Cooper to The Australian Financial Review confirming a set of propositions contained in the review under the working title SuperStream.
According to the report, Cooper said one of the inherent inefficiencies in the existing system of superannuation administration was the lack of uniformity in the process. “There are no data standards about what employers have to enter into the system when a member joins,” Cooper told the AFR. However, echoing the concerns of Fielding, Cooper did say there should be no “big bang” introduction of a centralised clearing house for the superannuation industry.
As reported today, the Cooper Review into the superannuation industry will recommend a major overhaul of the industry’s administration systems — including standardised practices for electronic payment and transfer systems. According to industry estimates the overhaul could save $1 billion a year in administration costs.
But Fielding, who emphasised he is not against standardised practices, warned that any move to rush in new standardised recommendations could leave the industry with a new class of underinsured and uninsured Australians.
“Standardisation done badly will leave millions of people on the streets under, or uninsured,” Fielding said.
“We’re not against standardisation by any means, but what we do think is it’s very important to get things right the first time. If standardisation across the industry is implemented quickly and mistakes are made it’s very difficult to go back and fix any issues you subsequently create. As I said, the danger is that you end up with millions of people without insurance.”
“They want to play with pipes, but that doesn’t necessarily mean they’re plumbers — that’s the line we’re taking.”
Fielding referred to a Rice Warner Actuaries report that was part of the actuaries’ response to Phases One and Two of the Cooper Review. It stated the underlying overall design of the Australian superannuation and retirement income system, while not perfect, has met community demand and has general acceptance.
“It is true that other systems are also reasonable but, having chosen our three pillar structure, our focus should be on making it efficient — and not on redesigning it,” the report stated.
“What we’re saying is everyone might just want to take a breath and have a closer look at what it is we’re trying to do,” Fielding said. “I can’t stress enough how important it is to get things right the first time.”
But despite concerns about rushing to overhaul the system, both the Rice Warner report and Fielding agreed about the importance of employers remitting all superannuation contributions electronically in a form that allows funds to allocate them automatically.
