Super funds take electronic plunge
Super funds take electronic plunge
May 01, 2005: The superannuation and managed funds industries are about to move to a paper free environment through the introduction of a more user-friendly method for employers to pay compulsory superannuation guarantee contributions. Rodney Appleyard reports on how this new process aims to eradicate complications associated with the current system by implementing a new standard to streamline payments.
At the moment, employers and employees experience problems when they need to transfer superannuation funds from one account to another when, for example, an employee moves companies. But a new scheme aims to eliminate the time consuming paperwork involved with these transfers.
The SwimEC (superannuation, wealth and investment management Electronic Commerce) initiative is the name of the new standard for superannuation transactions, contributions and information. It allows employers to electronically transfer superannuation contributions and personal information to the participating superannuation funds.
It also aims to promote the development and adoption of industry-based message standards for e-commerce in the superannuation, wealth management and investment management environments.
Employers who need to pay superannuation contributions to multiple superannuation funds after July 1, 2005, when Superannuation Choice is introduced, will find this scheme particularly beneficial to them.
Superannuation Choice will allow Australian employees to choose where they want their superannuation contributions to be placed. This change could also intensify the competition among superannuation companies.
The SwimEC scheme has been created as a result of the superannuation and managed funds industries joining forces with the Australian Taxation Office and commercial partners to make administering super guarantee payments less troublesome.
Mal Brough, the Minister of Revenue and Assistant Treasurer, says that the advantages of this new standard will mean there will be less mistakes made through fund transfers and it will save on administration time too.
"The standard will reduce the number of interfaces currently used by different superannuation companies and employers to transfer funds. For example, in the next release, MYOB will incorporate information about employees that will include details of their bank accounts, the total amount of their contributions to date, and their superannuation history, so that employees will not have to complete forms manually, as is done currently."
"This will mean that electronic transactions will be carried out in the future without the need for paperwork."
Rob Hodge, the senior policy adviser of the superannuation fund of Australia, adds that under the current system, excessive paperwork has led to information being filled into too many different systems, which has meant that mistakes have been made frequently, and this has taken up time that could be better spent on other tasks.
"When you transfer information from one system to another, this increases the chances of information being mistyped, and it takes too much time to go back, look for the right information and then correct it.
"The success of this standard will be based on how many companies choose to incorporate it. IMG and Colonial First State have already said they will accept Electronic Fund Transactions with extra details about the employees, so that they do not need further paperwork to transfer the money across from one superannuation fund to the other. We hope that others will opt into this standard too."
Brough believes this will save big enterprises a lot of trouble."When you think about most employees having about five different funds, and employers have to deal with about 30 different funds for all their employees, it makes sense to introduce a standard that relates to all of these different schemes."
"Less paper will mean greater security in terms of the financial information going to the right place first time."
This initiative aims to increase efficiency by integrating systems with electronic gateways, and allowing data and the transfer of funds to be exchanged automatically. In addition, it is hoped that it will lead to the elimination of multiple, expensive proprietary interfaces for messages inside industry organisations, and it will allow administrators, payroll providers, SMEs and financial advisers to focus on the core business.
It is also expected to decrease administrative costs by re-engineering internal business processes; eliminate errors due to data entry and use of paper for transferring information and reduce costs of responding to member and investor enquiries.
Overall, the scheme organisers hope that the adoption of standards-based electronic commerce can provide cost reductions in excess of 20 percent for specific transactions.
Philippa Smith, the CEO of ASFA (The Association of Superannuation Funds of Australia), is convinced such targets are achievable.
"The new electronic standard will also increase efficiency in the superannuation and investment markets by streamlining transactions and reducing error rates, while bringing administration costs down."
The standard has been specifically designed to fit with the existing payment processing systems of employers and payroll providers. It also offers a standardised payment approach for the information that needs to be collected and forwarded to funds and the new payment protocols cater for a wide variety of different types of superannuation and employer groups.
"SwimEC effectively creates a governance structure for the development and maintenance of messaging standards across the whole superannuation, investment, and wealth management community," says Dr Michaela Anderson, the ASFA representative on SwimEC.
Ken Breakspear, the Financial Planning Association CEO and its representative on swimEC, adds: "The FPA can see immense benefit in linking financial planners and dealer groups into an overall effort to lift the take-up of electronic commerce."
Richard Gilbert, the CEO of IFSA (Investment and Financial Services Association), hopes that ultimately, all super funds and all employers will become participating partners in the new standard, which will make super contributions as easy as net pays to a bank account.
"The superannuation and investment environment is becoming increasingly fluid and dynamic. This initiative will help drive a more timely response to market and regulatory changes."
It should only be a matter of time before the standard is applied throughout Australia. So far, there has been no adverse reaction to the plan, which indicates that employers are looking to reduce the clutter of paper documents, and are not over-enamoured with filling in forms. This scheme offers them the chance to lighten their workload on both counts, while from the super funds organisation and employer side of things, the reduction in complexity will be most welcome, with significant cost savings to be made.
It seems like a natural progression, and one that will likely catch on very quickly as it seems to be a win-win situation for all parties involved in the process.
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