Guest Comment: MySuper means mixed messages for the job market

There is no doubt that the impending shake-up of the Australian superannuation industry will have a massive impact not just on employers and employees, but also on the job market. The MySuper regime is set to begin in July 2013; and as the sector struggles to cope with what is its biggest single change in many years, sourcing and acquiring the skills to effect the transition will be absolutely business critical. But unfortunately, it will also mean bad news for other roles within the industry.

Put simply, from 1 July, to comply with government reform aimed at simplification and transparency, every employer must offer a compliant MySuper product as a default fund option. Consequently, unless employees opt for an alternative, their contributions will automatically be paid into the default fund. It sounds fairly straightforward, but one of the features of MySuper, the inter-fund consolidation, may cause the industry a few headaches.

Historically, most of us have had multiple superannuation funds, which also means multiple sets of administration fees and insurance premiums even when the member may no longer be eligible for a pay out. Additionally, lost and unnecessary superannuation interests can increase fees and reduce savings. The whole MySuper scheme, as part of the Stronger Super Government Reform, is designed to ensure both a reduction in the number of inactive and unnecessary super interests and the provision of adequate benefits in retirement. However, the government has also said that it will take steps to consolidate interest with balances under $1k, lost accounts and inactive accounts, which will rise to a threshold of $10k in the latter half of 2014.

The employment outlook

For the job market this really is a mixed bag of news. While there will undoubtedly be large Stronger Super projects, the consolidation of non-active members’ funds could spell trouble. Small funds rely on member numbers for revenue; if members reduce then so does revenue, with the inevitable impact on headcount. It is also possible that the membership of large industry funds will decline significantly.

The largest three funds, for example, have almost 5m members, the majority of which are likely to be below the $10k threshold – that’s almost a quarter of the Australian population. The likely decline in membership for these organisations, which employ thousands of people, will be hugely significant and there will be an unavoidable knock-on effect on the back-office administration houses that rely on outsourced work. Additionally, as most funds have a default life insurance component, the member decrease will also affect premiums. As many insurance companies have relationship managers, claims teams and underwriting teams dedicated to serving the larger funds’ insurance arrangements, there could be a downward pressure on headcount.

On a slightly brighter note, the enormous transition needed to effect and implement this legislation is likely to mean a significant rise in project-based roles. It will also mean that the large superannuation funds and associated insurers will have to become a bit more creative and look at more innovative ways of retaining business. As a result, there may be a rise in outbound-retention phone-based positions, and organisations will have to rely heavily on senior relationship and business-retention staff as keeping membership levels stable will be essential.

While the legislation is broadly seen as a positive move for Australia, the sting in the tail could well be the effect on the overall employment picture and the impact on the industry has to be, at best, mixed.

Ben Connelly, Manager - life insurance, superannuation and operations, Darwin Rhodes Australia. The views expressed are those of the author and not those of eFinancialCareers.

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