(June 28, 2011) – Australian superannuation funds need to implement reform to preempt regulatory legislation working its way through the country’s government, consultants have said.
The Australian government is drafting legislation dubbed the Stronger Super package in response to the Stronger Superannuation Review—also known as the Cooper Review—that was released last July.
As the reform draws near, consultants are advising superannuation funds to embrace reform sooner rather than later to prevent unnecessary pain.
“Fundamental reform is ahead. Incumbencies will be challenged and opportunities will emerge,” Mercer managing director and market leader for Australia/New Zealand, David Anderson, told Global Pensions. “Early action will mean the difference between recognizing opportunity, only scraping through to meet the regulatory requirements or losing market share.”
“The Stronger Super reforms will be complex and will likely come with a large implementation cost for funds and providers. An early understanding and preparation will provide an advantage in implementing the changes well before restrictions or limitations on cross-subsidies come into effect,” Anderson said. “Early action could result in significant savings.”
It is presently unclear what specific form the final legislation will take. The Stronger Superannuation Review outlined several recommendations and it is expected that the legislation will be based on the report’s advice.
Perhaps the largest change suggested by the Stronger Superannuation Review was MySuper, a low-cost simple default fund option. If adopted by the Australian government, all superannuation funds will need to offer MySuper within a two-year transition period after its introduction.
Uncertainty over the specific details of the reform is “not enough to justify doing nothing,” Mercer’s Anderson said. “There are definite steps they can take now which will benefit the fund regardless of the final outcome.” His principal suggestion to funds was that they need to consider strategic, operational and member engagement issues.
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