Proposed changes to superannuation which will force thousands of businesses to select new default superannuation funds for their employees will mean more administration and work for small business, according to a superannuation expert.
The Federal Government has proposed that Fair Work Australia establish a panel to select between two and 10 super default funds which will be known as MySuper for each of the 122 modern awards.
Under the current regulations any business with a superannuation fund in place as at September 12, 2008 can use that fund as their default fund. However, the proposed changes will remove this ability to grandfather.
Douglas Latto, president of the superannuation adviser group Corporate Super Specialist Alliance, told SmartCompany the “very significant” changes proposed meant unless the fund a business had chosen was on the MySuper list the business could not use it as a default fund.
“We believe a lot of employers will be forced to switch funds as default fund, which has a lot of repercussions,” he says.
Latto says the impact will include the loss of existing insurance arrangements, the cost to members of transferring the money and the cost to employers of having to select a new fund.
He says the changes are likely to hit small business harder and many small businesses will be forced to change funds and they will have difficulty in choosing which funds to use.
“They are going to be left more unaided than the big companies as they won’t be able to afford to get assistance,” he says.
“They have to establish the funds, fill in the forms and make a selection. If you are a small business owner you really don’t want to do that.”
Latto says CCSA believes the Productivity Commission, in assessing the impact of the changes, has “completely underestimated” the amount of effort and work required to switch funds.
However, the Australian Institute of Superannuation Trustees says for many businesses the process of transferring funds will be “smooth and seamless”.
Fiona Reynolds, chief executive of the AIST, told SmartCompany MySuper funds will be the gold standard for workers who do not make an active choice about their super and should not be in a position of having to pay for bells and whistles they do not use.
“These new reforms aim to ensure that all default members are in a cost-effective, highly-regulated product with the best practice governance standards,” she says.
Reynolds says AIST will be seeking clarification from the government about the potential exclusion of some corporate MySuper funds as default funds.
“Given the strong track record of many not-for-profit corporate funds, we are concerned this could be an unintended consequence of the Bill,” she says.
Reynolds says the proposed new arrangements for default funds may not affect businesses that have enterprise bargaining agreements, as these arrangements generally override Awards.
“There is still time to make amendments or consider transitional arrangements,” she says.
“Moreover, most of the master trusts – which many small businesses currently use for their default arrangements – are expected to offer MySuper products and many will be public offer.”