Administrating through a pandemic

There is no doubt that one of the biggest responses to the COVID-19 pandemic in Australia was the Government’s early access to superannuation scheme. 

Once the scheme was announced to the public, super funds had just weeks to come up with a process that expected the funds to release a maximum of $10,000 to any member suffering from financial hardship as a result from the virus’ impact for the first tranche. 

Despite worries about liquidity, Australian super funds were successful in collaborating with their administrators and the Australian Taxation Office (ATO) to roll out the program.

Link Group’s chief executive for retirement and super solutions, Dee McGrath, told Super Review, that they had just 19 days to work with the ATO and the broader industry to build, design, and implement the scheme.

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“The industry did a really good job in coming together in a collaborative way to implement a solution. Overall, there have been 3.3 million claims across the industry so far.

We have processed over two million of those and about $17.5 billion to date. The industry has done a really good job, our clients have been incredibly proactive and supportive through that period,” she said.

Apart from building the system that would process the applications, McGrath said Link needed to think through the security and what the ATO were doing. The administrator added features such as SMS updates once it received a claim to validate the member had requested the claim as a form of second line of defence.

As the Government stipulated that 95% of claims needed to be paid within five business days, McGrath said Link needed to make sure they could process those payments that were in the thousands of dollars.

McGrath said the biggest challenges were to do with processing, having to quickly address member questions, and trying to fast-track claims within 24 hours for those people who were in dire circumstances. 

“One of the things that you don’t necessarily design for – we had people that through no fault of their own might have put a wrong digit in so we had incorrect bank details.

We were seeing rejections on a daily basis in the files being sent to the banks so we had to contact those people and get things reprocessed and so it was a really large program of work,” McGrath said.

“There were people in some quite dire circumstances so we were making sure we were able to deliver. So far we’ve delivered around 97.5% of the claims in the five days and also being able to make personal contact with people where we needed to clarify something.”

Mercer commercial operations leader, Pacific, Chris Stevens, said Mercer had identified that it needed to work quickly with its superannuation fund clients to ensure everyone was on the same page. 

“We had to set up project teams quickly, to make sure the tech and the interface with the ATO was in place, and we could support the scale and volume of requests coming in.

That was a really successful program that led to deferrals of some other activity but it was really critical and we prioritised that for members. By in large it was very successful and while there is still some activity to early release, it certainly had its peak in April, July, and August,” Stevens said.

He noted that prior to the second tranche of the scheme, the ATO recognised that security of member information was critical which meant administrators had to introduce additional identification requirements which led to some minor delays in issuing some payments. 

“But it was a prudent change the ATO introduced in the third quarter. Generally, we were in good shape in being able to support that outcome.”
Insourcing vs outsourcing admin

Given Aware Super, formerly First State Super, both insources and outsources administration chief operating officer, Jo Brennan, said the fund needed to process the early release claims under three different systems.

The super fund inherited the three different systems as a result of the mergers with StatePlus and VicSuper. 

While both StatePlus and VicSuper insourced all of their administration, First State Super used a hybrid system with some services inhoused and some outsourced.

“When it came to the early release scheme we needed to make changes and processes three times to each platform. This increased the cost and risk when making the changes three times,” she said.

“We have the WA Super merger coming up next month and we are fundamentally simplifying our business and bringing all our administration inhouse so that we have full control and accountability for that service delivery. It’s a really complex program of work and so we’ll do that progressively.”

Brennan noted that the fund looked to amalgamate the three systems within the next 18 to 24 months.

She said insourcing allowed her fund to have full accountability and control on the member experience. The ability to streamline and drive its strong digital first model would allow the fund to have its hands on the levers that would make the most difference for members, she said.

“By insourcing we can focus on the digital side allowing members to access us anytime and we’ll be able to drive a strong continuous improvement around that,” Brennan said.

“We’ll also be able to drive the member first culture focus across the entire team through one single model and view by having a single view of our members. By having one system we’ll have that control and accountability and it will create a cost efficiency by using our scale.”

However, McGrath said super funds were more likely to outsource rather than insource their administration.

With the Government and regulators putting focus on members’ best interest, McGrath said super funds were looking at what they could do themselves versus what an administration partner could provide for their fund.

“Going forward, less and less funds are going to look at the end-to-end themselves. I think they will look at having a large component of administration outsourced from a provider to provide scale and the continued investment into technology,” she said.

The insourcing and outsourcing topic, Stevens said, was something the wealth management industry was continually considering for their super administration whether it be part of their offering as a core part of their business or to looking to partner with an administrator.

When thinking about the investments Mercer had made into their administration business on an annual basis, Stevens said there were very few examples where he could see where funds could insource their administration as it was a significant investment commitment.

“Insourcing potentially adds risk to the business and funds need to be mindful of those things. By in large we still see the majority of our industry being administered by very large institutional providers,” he said.

WHAT FUNDS WANT FROM THEIR ADMINISTRATOR

Even prior to the pandemic compelling businesses to pivot towards digital offerings, super funds were already looking at administrators to help support their value proposition through digital and data services. 

Stevens said more super funds were asking Mercer to provide broader access to member data to gain a better understanding of their membership to allow them to give better support.

Brennan said Aware was looking to drive a digital-first experience for members to allow requests to be processed quickly, and to provide a facility for members to track their requests – much like tracking parcel deliveries. 

This would allow members to understand the timeline and where things were in the process, and empower members to have the most efficient and seamless service by being able to access their fund anywhere, anytime. 

App support was another part of the digital first experience Brennan said was an important part of their administration.

“Members will be able to go to the app safely and securely and simply be able to access the information they need and complete the things they need to do online simply and consistently,” she said.

“If they need help and support we have a team that’s empowered to be able to help them with what they need quickly and as simply as possible. Super is complex and being agile makes it less complex.”

She noted that the early release scheme highlighted how important security was for members and that her administration team were conducting ongoing assessments and reviews of its security system and model. 

McGrath agreed and said there was a big focus on digital transformation and that COVID-19 had fast tracked that focus. This included designing experiences that made it easy for members to engage with their fund whether it was through mobile apps, websites, click-to-chat functions, and phone services.

Personalisation and the ability to respond to member needs was another part of the digital transformation as Link was working on building tools and solutions to help people plan for retirement. 

She said super members needed to have the tools to provide them with a living salary in retirement.

“So, we’ve got some digital capabilities we will be launching in 2021 that helps them to be able to put certain funds into a pot that gives them an income. They might want to put some in a rainy day, or into a holiday fund, or whatever they choose to which allows them to manage their funds in retirement more effectively,” she said.

“The other thing is administration is very much enabled by technology so I think funds are thinking about how they look at their service strategy and us as an administrator the investments we continue to make. 

“We made $250 million of investments in the last year and we continue to build on the capability that we have. It’s about taking the friction out of the experience and making sure it’s a good experience and providing the tech and tools to further clients and having that human element in our people that are servicing them every day.”