Corporate superannuation: An administrative solution

One of the biggest issues facing business today is streamlining administration to make it more time and cost effective. Unless a company has the ability to outsource the lion share of its administration it is imperative they look inward to asses their current arrangements.

One area of administration that can be time consuming and ineffective is Superannuation. Unless a company has a quality Corporate Super (CS) fund (also known as group super) in place then employees will look to have their SG contributions directed to the fund of their choice thus creating additional pressure on administration.

All employers must now have a default Company Super fund that their employees can use if they don’t have already have an existing one. Since ‘choice’ in super came in many employers assumed their employees would move their superannuation into funds of their own choice. Whilst a few did, it has been well documented that many chose to stay put. We see that many businesses have spent little time and effort in administering a quality super fund due to this assumption and unfortunately this has turned out to be a costly mistake, however it’s never too late.

A well run Corporate Super program cannot only save a business time in administrating individual super funds, it can also offer its employees a great alternative with superior benefits such as group insurance and an investment menu. Employers can use the fund as an incentive to retain or attract staff such as paying the premium (which should not be very expensive due to the potentially generous automatic acceptance levels) for the employee’s salary continuance insurance, a small but effective gesture.

In our experience, most existing corporate super plans are poorly administered with members more than likely paying fees that are too high and often paying upwards of 3% in contribution fees.

Many CS funds that are in place are not actively managed by a qualified Financial Adviser and are therefore probably being over charged and under performing. What many employers don’t realise is that the fee structure that is built into the fund actually includes a portion to cover some or all of an adviser’s time.

By having an experienced adviser appointed to your company’s corporate super fund you may be able to achieve the following:

• Higher insurance automatic acceptance levels (AAL’s) for Life/TPD and income protection.
• Lower annual and monthly member fees.
• Member spouse inclusion for group insurance rates.
• Zero contribution fees.
• Full advisory service (depending on current fee structure)

The adviser will be able to negotiate using leverage from competitors provided they are completely independent.

A review of your CS fund should not cost you much, if anything and you should be under no obligation to appoint the reviewing adviser to the fund. They should simply look at the details of your existing fund and determine if they can change any of the above for the better.

Corporate Superannuation seems to be a much underrated tool, not just for administration, but for attracting new staff and retaining existing ones. With the right adviser, members will not only receive advice on which investments to use but they will also be advised on important issues such as insurance.

Having an experienced adviser appointed to the fund is paramount to achieving lower fees, better investment choice and better insurance packages. There are many providers of corporate superannuation which may make deciding which one to use difficult so it would be advisable to appoint an adviser prior to committing to a particular provider.

Author: Matthew Kidd, August 2008

Matthew is a Director of Wealth Investment Management, based in our Sydney office.

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