Greater uncertainties for employers in 2017 have the potential to disrupt benefit programmes. Indeed, the first set of changes took effect on 1 January – changed means-testing rules for age pension payments could create complications for employers.
At the moment this affects people already in retirement and receiving a pension but it’s also generating concern among those nearing retirement. Their plans to finish work may be disrupted or delayed, especially if they’re near the margin of retirement readiness and this can have implications for employers trying to balance skills and experience with youth and opportunities for promotion.
The next set of changes is due to take effect from 1 July and will see a tightening of concessions for superannuation contributions and introduction of caps on benefits*. These changes are most likely to affect longer-serving and higher paid employees and executives but may also impact workers who are ready to make catch up superannuation contributions. The new rules will constrain their ability to do so.
Another hot topic that refuses to go away is insurance within superannuation. There is a lot of negative media coverage about insurance, from rapidly rising premiums to unfair claims assessment practices.
The design of insurance in Australian superannuation funds typically results in employees being insured by default rather than by choice. The benefits are often not well understood;
insurance is often a sleeping issue and few people pay enough attention to it until the time comes to claim.
When the ‘horror stories’ hit the media, the public often appears happy to assume the worst when it comes to insurers. As a result, your employees may become agitated if the insurance company in question is also the insurer of their benefits.
What can benefits managers do?
There is no doubt that some employees will actually be worse off because of the changes this year. You should be aware there are few opportunities for employees to be pleasantly surprised by the changes, but plenty of opportunities for the reverse. This can only lead to reduced productivity in the workplace which will flow through to the bottom line.
Benefits managers should anticipate the risk of higher levels of requests for information, education and assistance. Possibly, there will be an increase in complaints. Almost certainly, benefits managers and HR leaders will hear the words "I can't afford to retire just yet" more frequently.
For a benefits manager aiming to operate benefits that are fit for purpose, cost and tax efficient and deliver a high level of perceived value to employees, 2017 could well be more challenging than 2016.
Benefits managers should act now to assess the expected incidence of these changes on their own workforce – who is affected and by how much? What will the consequences be? Will those consequences have any adverse effects on the overall business and HR strategy of the employer? Once you know the specifics of the consequences, mitigating actions can be planned.
*Want more information on the new superannuation contribution changes? See here for details.