In October 2012, the federal government announced that it was providing seed funding for the establishment of a Superannuation Consumer Centre. When I first read about the proposed Superannuation Consumer Centre in the 2012/2013 Mid-year Economic and Fiscal Outlook and the $10 million the federal government was intending to kick in over 3 years, I was very excited that the government had committed to a service that would be, as Minister for Financial Services and Superannuation, Bill Shorten promised, a “bricks and mortar” service for consumers on superannuation.
What the federal government has actually promised however was to set up a Superannuation Consumer Centre Investment Fund, rather than a consumer centre, and the earnings from this special fund can then be used “to fund the ongoing costs of a non-profit organisation with a primary focus on superannuation policy research and advocacy.”
The Government’s contribution of $10 million over 3 years ($1 million during 2012/2013, $2 million during 2013/2014, and $7 million during 2014/2015 year) must be matched by the superannuation industry, or there will be no investment fund. If the super industry doesn’t cough up the extra dough, the government will renege on the promise of $10 million of seed funding.
The clock is ticking and it seems we are still waiting for matching funding from the super industry, which could mean that the funding from the federal government may dry up before the superannuation industry gets organised and is able to raise the matching $10 million. Some organisations have offered support, including AustralianSuper, Vanguard investments, FirstState Super and QSuper but the level of support provided is not publicly available information.
How much money is needed to establish and run the SCC?
Okay, let’s assume the industry matches the $10 million and we have $20 million sitting in the Superannuation Consumer Centre (SCC) Investment Fund from the start of the 2015/2016 year busily earning money for the SCC. Assuming the SCC Investment Fund generates positive returns, the first amount of cash available to finance the SCC will be available from 1 July 2016. Taking a conservative approach, assume the $20 million sitting in the fund earns 5% a year (net of investment and operating fees), which returns $1 million to the SCC Investment Fund.
Presumably that $1 million of earnings in the first year will then have to be used to recruit and appoint the director of the SCC, and hire appropriate staff (including possibly a lawyer, a researcher, a communications expert, enquiries staff, administrative staff and advocates), then rent and fit out premises and pay office-related bills including office supplies, cleaners and utilities etc, and also cover the expected travel costs of busy consumer advocates and hopefully have enough money left over to commission research, and perform the advocacy role.
According to Jenni Mack, Choice chair and a member of the SCC establishment committee, the funding target is now $30 million. According to industry magazine, Super Review, consulting firm Mercer has estimated that the SCC could operate for 30 years on a $30 million investment, based on spending of $1.8 million a year. Apparently, the SCC will eventually be funded by consumers, presumably on a user-pays basis.
Why is the SCC important?
The Superannuation Consumer Centre’s proposed opening date was July 2013, and then it was pushed back to August 2013. Since May 2013, SuperGuide has not heard any further information about the SCC, its opening date, or its funding status.
I really hope that the superannuation industry commits to the SCC, and I hope that the Federal government and super industry kick in a lot more money if the SCC is going to be solely financed from the earnings of the SCC investment fund.
Historically, the superannuation industry has not looked kindly on consumer advocates, and the industry has often treated them as more of a hindrance rather than a help. I am quite curious as to how many industry organisations will be willing to donate money to the SCC Investment Fund, and how this ongoing financial commitment will be shared by the industry and by the federal government.
Many of you would be familiar with my ongoing gripe that consumers are rarely represented on advisory bodies and committees that are supposed to be looking after the interests of superannuation fund members. Let’s hope that the tentative beginnings of the SCC eventually morphs into a consumer-friendly service; and a service that ensures changes to superannuation rules take into account the impact of those changes on super fund members, including the members of self-managed superannuation funds.