High cost processing slices $3.5 billion a year from super payouts

A great deal of money is chewed up, in the back offices of Australia’s commercial superannuation funds.

Indeed a new report, by the Superannuation Review, estimates that $3.5 billion a year is spent, simply processing superannuation transactions.

That money might be better used, instead, to boost our ultimate retirement payouts.

That huge expense, perhaps, becomes a little more understandable when we see, as the report also notes, that there are about 100 million of superannuation transactions each year.

However the  Review team, is still far from satisfied with this situation.

It says, quite bluntly, that the time has come to drag the industry’s processing into the 21st Century.

“There are technological solutions now available which provide the basis for substantial improvements in superannuation back office processes,” it says.

This should result in substantial savings, which could be passed on to fund members, the report adds.

With modern processing, the report says, the cost of individual transactions could drop to just 5 cents each.

That would cut back office costs  to just $5 million  a year.

The reality, of course, is that savings like that are still some way off.

A great deal of work and re-equipment would be needed, to achieve them.

And even the review team admitted that this would have to be approached incrementally.

The industry, though,broadly, welcomed the report which is part of a broader pattern   of reforms, that the Federal government is promoting for the industry.

The Australian Superannuation Funds Association says it provides a solid platform on which to build a more efficient system.