While the turmoil in Federal Parliament and the Financial Services Royal Commission were getting all the headlines, other low-key but very important changes had the biggest impact on super funds in 2018 and will again in 2019.
No Progress on Super in Parliament
There’s not going to be much progress on changes to superannuation legislation before, what is now, an inevitable Federal Election in May 2019. 2018 ended in a political stalemate with the current Government not always able to control either house of Parliament.
In the last week, the Government lost another vote on which it can rely in the Senate, making it less likely they will be able to pass their Protecting Your Super reform package. Even before this, the Government didn’t seem to have the numbers in the Senate to pass the legislation. The PYS legislation would impose changes to insurance in super and require the automatic consolidation of small, inactive accounts, that would be first transferred to the Australian Taxation Office (ATO).
Productivity Commission Report Not the Main Game
Opinion polls have been pointing to the ALP as the favourite to win the next election. Either way, the priority of the Government after the election is going to be on implementing the recommendations made by the Financial Services Royal Commission. The recommendations made by last week’s Productivity Commission’s report on superannuation are going to have a lower priority, although they will continue to influence the policy debate.
Many of the Productivity Commission’s recommendations echo the draft recommendations they made last year, many of which have already been picked up by the Government or incorporated into the Insurance in Super Code. Their signature recommendation of allocating new entrants to the workforce one of ten “best in show” funds (unless they choose an alternative) is a political hot potato that probably won’t be implemented.
Royal Commission Report Set to Dominate the Policy Debate
The Financial Services Royal Commission will issue its final report right on time on Friday, 1st of February 2019, and the Government will make it public immediately. Whatever recommendations are made by the Royal Commission, it is highly likely that both the Government and Opposition will commit to implement all of them after the election.
My prediction is that the Royal Commission will recommend:
- a ban on “grandfathered” trailing commissions;
- more litigation and less negotiation with companies that break the law;
- a new superannuation regulator;
- a new or increased focus on conduct regulation;
- a large number of prosecutions arising out of their case studies.
All of this is going to take a while to put in place. Legislation is not likely until the end of 2019 and implementation will take place from 2020.
In the meantime, the larger industry funds are experiencing higher than forecast member and contribution flows as they are perceived to have fared much better than their retail competitors at the Royal Commission.
While the superannuation world waits for changes arising from these high-profile commissions of inquiry, the APRA Outcomes Assessment Test, the Insurance in Super Code and re-engineered super fund reporting to the ATO are requiring major investments from funds and are already driving major changes.
New APRA Test, ATO Reporting and Insurance Code the Real Drivers of Change
APRA Outcomes Assessment:
APRA released a package of new requirements for APRA-regulated super funds in December 2018 intended to strengthen the delivery of quality outcomes for fund members. The key change is an annual outcomes assessment, requiring funds to annually benchmark and evaluate their performance in delivering these outcomes as part of their business planning cycles. Not only will this lift standards in super, it will also facilitate the merger of poor performing funds into better performing funds.
New ATO reporting:
New systems for super fund reporting (known as the MATS and MAAS projects) to the ATO will require funds to report on a near real-time basis, thus helping to identify employers not meeting their obligations. This will massively increase the volume of information being sent to the ATO and will mean that myGov and new online commencement forms will have much more comprehensive and up to date information.
Insurance in Super Code of Practice:
Most super funds are in the process of implementing higher standards and quicker claims processing for their members as part of implementing the Insurance Code. Many of the changes in the PYS legislation and recommendations made by the Productivity Commission were already incorporated in similar requirements of the Insurance Code. This includes the cessation of insurance cover for low account balance members and opt-in insurance for many younger members.
IQ Group is Here to Help
The IQ Group is keeping abreast of all these changes and is both mapping their impacts for many of our clients and designing and implementing solutions that improve the member experiences.
If you have questions or would like to find out how IQ Group can assist, contact us at email@example.com.
Written by David Haynes
Six Tips for Running a Smooth Superannuation Fund Transition Project.
Superannuation fund transitions come in many shapes and sizes. This could include changing funds (successor fund transfers), changing administrator, changing administration platform or any combination of all three. Each has its own challenges. What works for one may not work for another. Ultimately, there are no hard and fast rules to follow. Most projects will follow a standard process, like locking down scope and managing change. However, when it comes to transitions projects, there are several key considerations that can make the process smoother.
IQ Group has played a fundamental role in many major fund transitions over the years. From our wealth of experience, we have compiled our top six tips for rolling out a smoother transition:
- Accept that some things will be better, some will be worse and most will be the same.
This is true for all transitions – yes, even in a successor fund transfer. This is a mantra that everyone involved should be chanting to themselves every day, especially when stress levels are high.
There is no perfect fund, administrator or platform. Each comes with its own strengths and weaknesses. It’s not realistic to expect everything to be at least the same or better. Ensure you’re really taking the time to question the impact of anything you consider a backwards step. While something may seem important, ask yourself:
- Do you really need it day one?
- Are there things that could mitigate the impact that you can live with in the short term?
- Is this worth focusing on and taking time away from other activities?
- Is it really a backwards step, or is it just another valid way of getting to the same result or outcome?
- Subject matter experts are vital.
Subject matter experts (SME’s) are some of the most difficult people to source, but they are an invaluable resource during a transition project. While their time may be in short supply, do what you can to get them. You will need SME’s for the whole duration of the transition project (and sometimes afterwards as well). A transition project will only get so far without them.
During their time on the project, ensure you pair the SME up with someone who can learn from them. You may not consider this to be a priority, but once your transition is live, the SME will move on to the next big thing and you’ll need someone around who can assist with the inevitable post-transition issues.
In addition, try to document as much as possible and in a “generic” way so that it can re-used in future transitions.
- Know your processes and why you do things the way you do.
Some of the most frustrating words you can hear are: “we do (x) this way because that’s the way we’ve always done it” or “I don’t know how (x) works, why can’t you look at the system and see what it does”.
If a company doesn’t understand its processes, why they’re done that way or what the intention is, you need to ask:
- How do you know if it’s being done correctly?
- How do you know if it’s meeting the objective?
- How do you know if there really is a difference?
- How do you know if there isn’t a better way of doing it?
The approach should be to get equivalent outcomes not like for like. The most important thing to aim for is the outcome. How you get there is less important sometimes. There may be better ways of doing things, or even just different. Don’t focus on the process because it may cause you more time delay and costs than you need.
- Know your Business Rules and Information.
Knowing your fund rules is just as important as knowing your processes. You need the information right at the start of the project. Delays in getting the information will almost always result in scope creep at best, and delays to the go live date at worst. The rules need to be clear and complete. If they’re not, there will be lots of questions raised that will eat into the limited time you have for your SME’s.
- Don’t Assume.
Assumed knowledge is the curse of many projects, none more so than during a transition. Not everyone has lived and breathed superannuation for decades or will come to the project with the same experience and background that you do. Try to take a step back and consider what the people working on this project may not be aware of. However, don’t get hung up on detailing every single piece of minutia – overkill can sometimes be worse than assuming. Try and find the appropriate middle ground. Do this by asking questions, find out what people do and don’t know and provide relevant responses. Strong communication between all those involved is key.
- Expect Data Quality Issues.
If there is one problem that you can expect during a transition project, it’s going to be a data issue. As you come across these issues, deal with them pragmatically. The correct response is not always black and white. Be flexible. Sometimes you will want to fix them at source, sometimes you will fix them at target and sometimes you just need to let it be. Often, the 80/20 rule will apply (you know, where 80% of the outcome will be achieved during the first 20% of effort and the remaining 20% will take 80% of the time). Be pragmatic and flexible in your approach.
If your business is looking to run a transition project, IQ Group’s experts are here to help. To find out more or reach out, contact us at firstname.lastname@example.org.
Written by Luigi Gandolfo, Senior Consultant Business Analyst
Super funds have just one year to justify their existence under tough new rules just released by the Australian Prudential Regulation Authority (APRA).
APRA will be using these new rules to target underperforming funds and drive increased fund mergers.
APRA is not waiting on the final reports of the Productivity Commission or the Financial Services Royal Commission, and these requirements do not require legislation. Amongst the many pieces of superannuation legislation before Parliament are Bill that would give APRA more powers with which to drive these requirements, but they are not absolutely required for these new rules..
The new requirements compel super funds to annually benchmark and evaluate the performance of their MySuper, choice, legacy and defined benefit products in delivering sound, value-for-money outcomes to all members. The new ‘outcomes assessment’ sets a higher bar for super funds that must be reflected in their strategic and business planning.
Unlike some other changes (such as the new requirements for reporting to the ATO), these are not requirements that can be handed over to third party providers to fulfil. These changes are fairly and squarely the responsibility of super fund boards and their trustee offices.
APRA has released a new Prudential Standard 515 on Strategy Planning and Member Outcomes and supported this with Prudential Practice Guide SPG 516 Outcomes Assessment. The prudential standard sets out outcomes and key requirements, while the PPG is about designing, undertaking and using the outcomes assessment.
APRA is not telling funds the metrics they need to measure outcomes, although they have given these examples of what could be used:
- net investment returns, on an absolute basis, as well as relative to relevant benchmarks and risk/return targets over different time periods (e.g. one year, 3 years, 5 years and 10 years);
- fee levels, including costs per member;
- administration and operating expenses as a percentage of average net assets; and
- level and cost of insurance cover (by insurance type), including measures of account erosion such as the premium as a percentage of salary.
Except for insurance, APRA has not suggested using broader industry benchmarks. It is likely super funds will look for the development of new benchmarks and will be involved in an iterative process, talking to other funds, industry associations, regulators and service providers about the best way forward.
They have characterised the implementation of the assessment “as a process of continual improvement” that will “evolve over time”.
When other requirements have been introduced – such as when MySuper was developed – APRA have said they don’t want a ‘cookie-cutter’ approach. However, it’s not completely clear what approach they do expect and what minimum outcomes are required.
APRA have said that funds “are expected to set targets or goals that are not already being achieved or are not likely to be very easily achieved based on existing forecasts.” This will be a challenging for both high performing funds and those that already need to improve their outcomes.
These new requirements will be given the highest priority by super funds even through the details will take time to become clearer. As funds develop their outcomes assessment models and these become known throughout industry and APRA gives their preliminary evaluation of different approaches, funds will need to be adaptable in their responses.
IQ Group works with very many super funds and service providers, and is developing tools to help funds respond quickly, comprehensively, and with agility to this exciting new environment in which members interests are paramount.
In the new year, IQ Group will provide our clients a framework for action to address the critical need for reporting and analysis. To ensure your fund has the tools to respond quickly and comprehensively, contact us at email@example.com.
Well, MAAS is going to have a major impact on your Insurance Claims Handling!
Through the adoption of the Insurance in Super Voluntary Code of Practice (Code), Super Funds will have a more visible role in the insurance claims process and will generally need to process claims in a shorter timeframe.
Super Funds are required to publish their Code transition plans by 31 December 2018. The implementation of the Code includes compliance with new claims handling standards. These new standards will be challenging for many Funds.
There is an emerging industry awareness of all the issues that will compound and challenge a Super Fund’s ability to comply with the claims handling requirements. The good news is IQ Group has developed and redesigned claims handling processes and solutions for Funds in the past to increase efficiency and meet tighter timeframes.
The new Super Fund reporting requirements to the Australian Taxation Office (ATO) via the Member Account Transaction Service (MATS) and Member Account Attribute Service (MAAS) is one of the developments impacting on implementation of the Code. These requirements were introduced in October 2018 and become mandatory in April 2019.
MAAS reporting includes the Provision of Details (POD) module which enables the ATO to notify Super Funds about the death of their members. This will result in many additional notifications to be accepted and managed by Funds. Death notifications are not always now received for low balance accounts. It is expected that the additional notifications from the ATO will have an impact on time, resources and implementation plans for ongoing and new remediation projects.
The receipt of death notifications from the ATO will require Super Funds to commence the notification of beneficiaries and then trigger a Fund to process additional benefit payments. Couple this with the fact that deceased members cannot be sent to an Eligible Rollover Fund for an extended amount of time (minimum of two years), there will be more demand on Funds to process a higher volume of claims and do so in a manual and resource intensive manner. Additional claims may be more expensive to process for many Funds. Potentially, this might mean Super Funds may now be required to process many more insurance claims, much faster.
To explore these issues and investigate possible solutions, the IQ Group is holding two Claims Handling discussion groups for Super Funds and Service Providers. These forums are free and will be held at IQ Group offices – Tower 5, Level 20, 727 Collins Street, Melbourne 3008 and Level 4, 31 Market Street, Sydney, NSW 2000. The one-hour discussion groups will be held on these dates and times:
Melbourne: Tuesday, 5th February 2019, 4:30 -5:30 pm
Sydney: Tuesday 12th February 2019, 4:30 – 5:30 pm
To register for these workshops please email firstname.lastname@example.org directly, or call him on 0400 051 801.
Sam Gosios, Managing Principal of IQ Group
Every year IQ Group holds their Seasons Art Competition, open to the children of IQ Group staff and family. It was a very tough choice, but this year’s winning art submission was from, Adhrit, aged 5, son of our own Pranitha Nagineni. We look forward to seeing more great artwork artwork from him in future. Congratulations Adhrit!
On behalf of the team at IQ Group, we would like to wish you all the very best for the holiday season.
Here are the amazing submissions we received:
Adhrit: Age 5
Organisations around the world are realising that the concept of gaming and gaming elements have become ubiquitous in our daily lives. Whether on our phone, via the internet or through various devices, we are exposed to gaming elements. Think about your everyday journey to work. The mobile game apps you play with, the badges you earned because you’ve hit the target with your smartwatch or the loyalty points you received for shopping. When we think of games, we think of fun and the feeling of exhilaration when we win or complete an adventure.
noun gam·i·fi·ca·tion (Merriam-Webster) the process of adding games or game-like elements to something (such as a task) so as to encourage participation.
In Mercer’s 2020 Super Fund Executive Report (Mercer, 2017), the findings were that 39% of superannuation funds rated ‘improving member engagement and service’ as their top business and strategic priority. However, the industry is faced with a growing distrust and disengagement from Australians ranging from millennials to the indigenous communities. Key findings to this growing problem is the lack of understanding on how superannuation works due to a lack of financial literacy linked to superannuation. How can the industry transform a mundane topic into something fun, sticky and engaging?
Perhaps, the first area to address as an industry is to explore designing mobile-based learning apps that will help teach financial literacy linked to superannuation. When we asked our millennial friends what mobile apps they use to learn about financial matters and why, apps like Raiz (formerly known as Acorns) and the Commonwealth Bank were mentioned because these are interactive and teaches them to save. Millennials are known to make a difference to change the world. Imagine a mobile learning app that teaches them how to ethically invest via their superannuation fund by selecting investment options that invests in sustainable initiatives.
There are key principles to building an interactive learning experience by applying gamification elements:
- Learning must have contextual relevance from a strategy, culture, and values perspective. Learning needs to be relevant to real life and games can be used to simulate this.
- Learning is most effective when learners are intentionally and repeatedly exposed to a cycle of learning, practicing, reflecting, and then repeating. This can be built into the game mechanics.
- Learning becomes engaging when users share experiences through high scores badges and leader boards. The competitive streak in some will kick in to try harder and achieve more.
- Learning is an experience as opposed to a once-off event; entails a process of learning over time, by creating a game that is not time boxed.
- Learning is a social experience, and a gaming environment allows learners to exchange ideas, and gain understanding from collective or shared experiences.
- Learning should provide instant feedback.
A gamification example using these principles is IQ Business South Africa’s online learning delivery to a major bank spread across Africa addressing a serious topic on resilience. Users click on a secure browser link which brings them to a game show room, complete with game show host, avatar selection and a ‘Wheel of Fortune’ like spinner that randomly chooses trivia topics. Users earn points with correct answers and learn why immediately when they select the wrong one.
Organisations that intentionally incorporate gamification understand that gaming is age irrelevant. The gaming appeal is about the game mechanics and associated individual preference, not demographics. Gamification should embody the brand and culture of the organisation. So, the game mechanics should be customised to teach users what the brand stands for. A great example of this is Siemens faced with major branding and communication issues to a diverse set of internal and external stakeholders. Their solution was designing Plantville, an online gaming platform to give the experience of being a plant manager. Players are challenged to maintain operation of their plant while improving productivity, efficiency and facility health. The online game hit the mark with their target stakeholders and more. Stories about Plantville were featured in more than 235 outlets, reaching more than a million people.
Games unleash “people’s natural desire for competition, achievement, status, self-expression, altruism, & closure.” JD Dillon
Source: IQ Business South Africa
Gamification design elements have structure and content. Structure consists of points collection, leader boards, levels of difficulty, badges and rewards. Content consists of challenges in progressive stages, stories that are captivating, avatars or characters players can take on, time-bound tasks and freedom to fail (include ability to respawn to try again). Behavioural science research shows that
gamification can instil behavioural change depending on what the game is teaching, engaging and motivating. Popular gamification technology used are game design tools like Unity and Unreal Engine.
Gamification is also becoming a popular method to engage with customers as it encourages participation, engagement and loyalty. Think of what superannuation members should interact with. The website, the app, the social media page or all three. Then integrate game mechanics to draw them in regularly.
There are a handful of superannuation funds that have some degree of gamification in the form of retirement calculators where you enter financial data, receive a ranking and see where you are likely to retire in e.g. a poor house, a big house or someone else’s house. Members can plug in different numbers to view different results. This is a start.
Consider gamification from onboarding members. Can they earn loyalty points by completing a survey of the onboarding experience? More points given when they visit their account to complete a task on the website? The points can then be converted to a tangible reward or even donated to a charity of their choice.
The use of gamification should always be linked to the overall fund strategy. Which member segments would funds like to increase engagement and interaction with? Is this about increasing membership growth or a preventative strategy to stop further decline in the member segment? Design games with an audience in mind. Get to know the target member segment, what their preferences are, how they like to be communicated and leverage on technology to reach out to the segment.
The question of ‘what to gamify?’ should be answered by your members. Add gamification to what members care about and something they value. Otherwise incorporating game like mechanics that do not serve an end purpose will be a complete waste of time.
The future of gaming will invade the corporate world as technological rapid advancements such as Virtual Reality (VR) and Artificial Intelligence (AI) are used in the gaming experience. We will see playing freedom across platforms allowing users to move device platforms without any gaming interruptions. Online gaming spectators will become a norm. As user experience and functionality continue to enhance, players can shape, enhance and control their game play. We will also see an integration of social media into gaming. And gaming will require physical involvement of the participants. Online gaming will be social.
HIQ Learning Services, a company of IQ Group Australia has teamed up with its sister company IQ Business South Africa to incorporate gamification elements to learning and customer engagement. Back in July 2018, in celebration of Nelson Mandela’s 100th Birthday, IQ Business South Africa in collaboration with VictoryVR, developed the virtual experience that brings users into Mandela’s shoes. The journey, created in virtual reality, enables users to stand on the hills of Mandela’s childhood to his prison cell on Robben Island.
Imagine a VR experience that can be built to teach the next generation of Australians, like a ‘choose your own adventure game’. The choices they make in different phases of their VR life can lead them into a desirable retirement or not. The time to incorporate gamification is now. Our future is game ready. For more enquiries about gamification, contact email@example.com.
Written By: Cynthia Cheong, Practice Leader for HIQ Learning Services, a company of IQ Group Australia
Adi Stephan, Head of Learning & Development, IQ Business South Africa