So you've outsourced your company super? What next?
By Christopher Page

KEY POINTS
Companies with 50 or more employees have to have a policy committee. But the guidelines about what these committees are meant to do are very vague. These committees are meant to help you keep the fund on its toes. Doing this is not hard but knowing a few tricks will help.

Some employers think that once the company has outsourced its super fund or the investment decisions are put into the hands of an independent trustee the fund is no longer their problem. Not so.

For companies with 50 or more employees superannuation legislation requires a policy committee be formed to take an active interest in the activities of the fund. The problem though is that there are no official guidelines that meaningfully outline what the policy committee should actually do? The irony is that where the guidelines are needed the most is where they provide the least detail.

Without a clear understanding of their role, many committees simply lapse or become prey to the fund talking about themselves rather than the committee working to keep the fund in check. Indeed, sometimes the fund that is supposed to be monitored by the committee ends up running the committee. If that happens then of course the committee has failed and it may as well be disbanded. But what if the company actually wants to put some bite into its policy committee?

Policy committees are there to act as the link between the fund, the trustee, its members and employer-sponsors. This is reflected in their guidelines which state they are there assist the trustee to deal with complaints and enquiries about the operation or management of the fund and to provide an avenue for members to enquire about investment strategy and performance, fund operations, and member information requirements. They should meet at least once a year. In practice this means that committee members are there to represent all the employee members. Reflecting this, they are not there to represent the fund. They are not even there to represent the employer.

To play this role powerfully, committees should demand their funds provide meaningful information that can be deciphered by human beings, that actually compares them with the market, that explains why the members should continue to stay with that fund, and why the fund is doing what its doing.

Not all funds will provide this type of information and so committees may want information provided by independent analysts, advisers, and consultants. This information does not need to be complex or expensive. But it must be understandable.

What you should know about your super fund

Driving your policy committee so it puts your super fund on notice to start giving you meaningful answers to your questions is easy. You start by asking a few incisive questions. And if the answers you get from your fund are hard to understand, tell the fund to lift its game because if you can't understand what its telling you then you should shift into a super fund that you can understand. What's the bet that your fund will start to answer your questions like lightening after that? Now start with these questions:

1. What organisation is really behind the super fund? What's its track record?
2. Who are the senior people at the fund? How were they chosen? What's their experience? Did they earn their spot on the team or were they parachuted in?
3. How has the fund been performing, after allowing for all fees? How does this compare to other funds over 1, 3, 5 and 10 years?
4. Does the fund invest similarly or differently to other funds? Why and how?
5. How is the investment menu structured? Is it flexible enough? Is it too flexible?
6. What total fees are you being charged?
7. How clear are the fund's documents, eg member statements, annual reports, member booklets? Is the fund's website any good?
8. How reliable is the fund's administration? Do phone calls, emails, letters get answered? Do the answers make sense?
9. Is the insurance deal good value?
10. What extra services does the fund or its advisers provide that can help the members today, rather than having to wait until they retire?

The most powerful aspect of these questions is that the way your fund reacts to your questions is probably a great indicator of how much you are respected by your fund. And if they don't respect you, take your money elsewhere. As you work through these questions you'll soon find yourself talking like an expert. You'll be the envy of every neighborhood barbeque.

Tricks of successful policy committees

Policy committees that work and are successful have some common characteristics. They may not be made up of industry experts, but they are made up of people who are committed, enthusiastic and who expect to be treated with respect by their super fund. They are lead by a chairperson who brings the members together and keeps them focused. Successful policy committees assign tasks to committee members, they trust and work with eachother, and they make decisions.

Above all though, successful policy committees work constructively with their employer. This means they will sometimes disagree. But their focus, commitment and willingness to make the right decisions will always win out.

To be part of a successful policy committee you above all need to be selfish. Why? Because your super is your money. Invested wisely your super will grow to be worth even more than your house. Invested unwisely it may not even pay off your car when you retire. Its up to you.

Need more information?

SelectingSuper has a range of information services to put your policy committee back in the driver's seat, ranging from easy to understand member report cards all the way through to sophisticated reports and tender management services. Call or email us for a chat or for more information.

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