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  • SuperStream Benchmarking Report (SRF711.0) annual report 1 July 2017 – 30 June 2018

    SuperStream’s goal is to enhance the productivity and efficiency of the superannuation system, especially in relation to the business processes associated with contributions, rollovers and the consolidation of accounts. Industry improvements are intended to create member benefits such as lower fees and improved processing flows.

    We measure SuperStream’s success by tracking conformance with:

    • the Data and Payment Standards (the Standard)
    • the rates of straight through processing
    • reductions in processing costs and improved member data.

    Benchmarking and evaluation of SuperStream

    The ATO, APRA and Treasury consulted with industry during early 2013 to:

    • develop a broad approach to benchmarking and evaluation of SuperStream
    • give insight into which key outcomes have been achieved.

    Wherever possible, these items were sourced from existing collections; in particular:

    • APRA’s regular quarterly and annual reporting forms released on 28 March 2013
    • the ATO’s Member Contributions Statement
    • other industry collections such as the ASFA VEDA Core Member Details Benchmark.

    During consultation a small number of data items weren't collected, which explains insight to the rate of take-up of the Standard and direct consequences of its adoption.

    These data items are included in the special purpose Superannuation Reporting Form 711.0 SuperStream Benchmarking Measures (SRF 711.0).

    See also:

    The SRF711.0 collection

    The SuperStream benchmarking data focuses on contributions processing by APRA-regulated funds and exempt public sector superannuation schemes (EPSSSs). It will be conducted quarterly from September quarter 2015 until the June quarter 2019.

    SRF 711.0 is collected by APRA for use by the ATO.

    This report contains ATO analysis and interpretation of the data reported on SRF 711.0 for the period from 1 July 2017 to 30 June 2018. It includes some reporting entities which have a different financial year end.

    Key concepts

    The data tracks the volume and cost of member contributions sent by employers to APRA-regulated super funds and a small number of other super entities.

    Reporting entities

    Reporting entities include:

    • APRA-regulated superannuation entities (RSEs) with more than four members (except as noted below)
    • many exempt public sector superannuation schemes (EPSSSs) that report to APRA under a Heads of Government agreement between the Commonwealth and each of the State and Territory Governments.

    SRF 711.0 is not reported by Eligible Rollover Funds, Pooled Superannuation Trusts or single member approved deposit funds.

    Employers

    Employers are required under the Super Guarantee (Administration) Act 1992 to send contributions on behalf of their employees at least quarterly, but many report more frequently. Monthly reporting is now the most common frequency.

    SuperStream standard – contributions

    The SuperStream standard requires:

    • an employer to send – and a fund to accept – contributions in a specified electronic format with a minimum data set and an agreed set of identifiers (for example a tax file number for each member)
    • data and money must be sent electronically and linked via a payment reference number to enable rapid straight-through processing by the receiving fund into a member’s account.

    Some alternative electronic methods are allowed under the standard (these are referred in the reporting of this data series as ‘Channel B’). These include pre-existing electronic portals operated by some funds which nevertheless must still meet certain minimum operational standards to be considered compliant.

    Non-conforming contributions

    Non-conforming contributions refer to a mix of paper-based, electronic and hybrid processes which do not satisfy the requirements of the SuperStream standard.

    These are often referred to as ‘Channel C’ contributions although they are not a uniform grouping. Contribution information may be forwarded by an employer in the following ways:

    • on a form via mail with a cheque; one or other of these components of data and money may be electronic (for example a BPAY payment)
    • a digital channel may be in use but falls short of the minimum requirements under the standard. Typically these types of contributions add cost, time delays, errors or complexity to the processing pipeline with adverse longer-term effects on members. The SuperStream standard aims to reduce contributions coming through this channel to as close to zero as possible.

    This report does not include personal contributions made by members in their own right.

    RSEs and YTD reporting

    Some reporting entities in the RSE population operate with financial years which are ‘non-standard’. This means that any data reported by these entities on a year-to-date (YTD) basis will be out of ‘sync’ with the rest of the reporting population.

    For example, in the March quarter most entities will be reporting their combined first, second and third quarter results on an YTD basis, when entities with a December year end will be starting a new financial year and will report only the current quarter results.

    To avoid confusion in interpreting the data series, the ATO has relied on discrete quarterly results for each entity and verified that these reconcile with respective YTD reports. A cumulative YTD and annual view has been built from these quarterly results.

    Key findings

    Findings included:

    • total contributions processed are approximately 138 million for 2017–18, around 3 million or 2.2% more than in 2016–17
    • there is a much higher volume now in the system compared to the 2010 Cooper benchmark when it was estimated that total volumes were around the 100 million mark
    • by the end of the June quarter 2018, 96.9% of all employer contributions were received electronically and in conformance with the SuperStream standard, 7.3% higher than at the same time in the previous year
    • when exempt funds are removed from the reporting data, the current conformance rate remains at approximately 97% (non-complying transaction is 3.1% and non-complying removing exempt funds is 2.9%) indicating that exempt funds are starting to transact in conformance with the standard.

    This graph shows from September 2015 to June 2019: a steady increase of Channel A transactions, a steady decline of Channel B transactions and a steady decline of Channel C transactions.

    • Channel A channel share has been growing steadily over the year and reached over 28 million contributions or 75.5% of all channel volumes in the June quarter 2018, compared to 71.7% at the same period last year. Channel A transactions have increased by 9.3% when compared to the prior year’s total.
    • Channel B’s channel share has increased slightly during the year with contribution transactions at almost 8 million or 21.4% of all channel volumes in the June quarter 2018, compared to 22% at the same period last year.
    • Non-conforming contributions in Channel C, have been declining, and reached just over 1 million contributions or 3.1% of all channel volumes in the June quarter 2018, compared to 6.3% at the same period last year. Channel C transactions have decreased by 49% when compared to the prior year's total. We expect channel C to remain steady over the next 12 months within only slight downward trend in movement predicted.

    Figure 2 shows a decrease in non-conforming channels from September 2015 to June 2018. Total conforming channels shows a fluxtuating increase from 78.9% in September 2015 to 96.9% in June 2018.

    Table 1: Channel A quarterly contribution transactions – June 2017 to June 2018 and total since September 2015

    Channel A quarterly contribution transactions

    Volumes (m)

    % of total

    June quarter 2017

    25.8

    71.7%

    September quarter 2017

    24.3

    74.7%

    December quarter 2017

    26.1

    75.0%

    March quarter 2017

    25.6

    75.8%

    June quarter 2018

    28.2

    75.5%

    Total since September 2015

    260.0

    64.4%

    Table 2: Channel B quarterly contribution transactions – June 2017 to June 2018 and total since September 2015

    Channel B quarterly contribution transactions

    Volumes (m)

    % of total

    June quarter 2017

    7.9

    22.0%

    September quarter 2017

    6.2

    19.2%

    December quarter 2017

    6.6

    19.1%

    March quarter 2018

    6.3

    18.6%

    June quarter 2018

    8.0

    22.2%

    Total since September 2015

    108.3

    26.8%

    Table 3: Channel C quarterly contribution transactions – June 2017 to June 2018 and total since September 2015

    Channel C quarterly contribution transactions

    Volumes (m)

    % of total

    June quarter 2017

    2.3

    6.3%

    September quarter 2017

    2.0

    6.2%

    December quarter 2017

    2.1

    5.9%

    March quarter 2017

    1.9

    5.5%

    June quarter 2018

    1.2

    3.1%

    Total since September 2015

    35.2

    8.7%

    Table 4: Total quarterly contribution transactions – June 2017 to June 2018 and total since September 2015

    Total quarterly contribution transactions for all channels

    Volumes (m)

    % of total

    June quarter 2017

    36.0

    100%

    September quarter 2017

    32.5

    100%

    December quarter 2017

    34.8

    100%

    March quarter 2017

    33.7

    100%

    June quarter 2018

    37.3

    100%

    Total since September 2015

    403.5

    100%

    Note: Data has been rounded to nearest decimal point.

    Channel volumes by fund share

    We have grouped super funds into size-based segments to:

    • better understand the potential drivers of movement between channels
    • reflect each fund’s share of contribution volumes.

    Rather than use the traditional assets view as a discriminator, transactions share better reflects the relative weighting that comes from active members and active employer contributions being received by a fund.

    While some variation exists in frequency of employer contributions during a period, this is a good sign from a contributions processing perspective.

    Table 5: Channel A contribution transactions by channel and segment – quarterly, June 2018

    Channel A

    Large tier (Top 20)

    Mid tier (21-70)

    Small tier (71-183)

    Total

    Volumes (m)

    21.5

    5.8

    0.8

    28.2

    % of total

    76.4%

    20.6%

    2.9%

    100%

    Table 6: Channel B contribution transactions by channel and segment – quarterly, June 2018

    Channel B

    Large tier (Top 20)

    Mid tier (21-70)

    Small tier (71-183)

    Total

    Volumes (m)

    5.8

    1.9

    0.2

    8.0

    % of total

    73.3%

    24.3%

    2.4%

    100%

    Table 7: Channel C contribution transactions by channel and segment – quarterly, June 2018

    Channel C

    Large tier (Top 20)

    Mid tier (21-70)

    Small tier (71-183)

    Total

    Volumes (m)

    0.8

    0.3

    0.1

    1.2

    % of total

    67.1%

    25.7%

    7.2%

    100%

    Table 8: Total contribution transactions by channel and segment – quarterly, June 2018

    All channels

    Large tier (Top 20)

    Mid tier (21-70)

    Small tier (71-183)

    Total

    Volumes (m)

    28.2

    8.1

    1.1

    37.3

    % of total

    75.5%

    21.6%

    3.0%

    100%

    Note: Data has been rounded to nearest decimal point.

    After grouping fund results by tiers – large, mid and small, channel shares do not vary greatly between tiers except in the case of Channel C (non-conforming) volumes.

    Due to their relative size, the top 20 funds account for most of non-conforming contributions (67.1%) which is a reduction (compared to 76.8% in the same period prior year).

    Funds in the smallest tier tend to carry a relatively higher load of non-complying contributions relative to their contributing membership (7.2%).

    Non-complying trends

    The percentage share of non-complying employer contributions has steadily declined over the reporting period.

    By the June quarter 2018, all entities in the data series reported 1.2 million contributions or 3.1% (compared to 6.1% in the same period prior year) of the total contributions were being received in paper, cheque form or via digital methods not aligned with the standard.

    The quarterly percentage trend Channel C transactions have declined over each quarter across 2017–18. We expect Channel C to remain steady over the next 12 months within only slight downward trend in movement predicted.

    Table 9: Channel C contribution transaction volumes – quarterly, June 2017 to June 2018 and total since September 2015

    Channel C quarterly contribution transactions

    Volumes (m)

    % of all contributions

    Quarterly trend decline (% share)

    Cumulative trend decline (%)

    June quarter 2017

    2.3

    6.3%

    0.2%

    -70.0%

    September quarter 2017

    2.0

    6.2%

    -2.8%

    -70.8%

    December quarter 2017

    2.1

    5.9%

    -4.0%

    -72.0%

    March quarter 2018

    1.9

    5.5%

    -6.1%

    -73.7%

    June quarter 2018

    1.2

    3.1%

    -43.8%

    -85.2%

    Total since September 2015

    35.2

    8.7%

    n/a

    n/a

    Note: Data has been rounded to nearest decimal point.

    Individual funds

    In discussions with individual funds about the composition of their non-conforming transactions, some clear patterns have emerged:

    Cheque and manual processing is generally not significant for funds under the 10% transaction level – usually comprising a small amount of re-work items and residual cheques payers

    • the major part of the tail appears to be comprised of electronic payers (BPAY, Direct debit, etc.) but without all the messaging data – a pathway that is common for many micro-businesses and owner managers
    • a large proportion of non-SG payments are also caught up in the reporting of the tail, such as insurance only amounts paid by employers.

    Non-conforming contributions

    In order to understand the fund make-up of the non-conforming tail more fully, we have focused our analysis on the 146 most significant entities influencing the Channel C numbers. We have excluded entities that receive negligible amounts of contributions (at a threshold of less than 100 contributions per quarter).

    Findings included:

    • for 2017–18 there were 1.2 million non-complying transactions (146 entities), a substantial decrease (47%) from 2016–17 where the total figure was 2.2 million (143 entities)
    • of the 146 entities that have non-complying transactions, 80% of the entities have non-complying transactions that account for less than 10% of their total transactions.
    Table 10: Channel C range and intensity of non-complying contributions, June quarter 2018

    % Range of non-complying transactions

    No. of entities in each range

    Non-complying contributions in each range

    50.1% to 100%

    4 (2.7%)

    68,489 (5.9%)

    30.1% to 50.0%

    2 (1.4%)

    9,163 (0.8%)

    20.1 to 30.0%

    10 (6.8%)

    328,464 (28.3%)

    10.1% to 20.0%

    16 (11.0%)

    199,693 (17.2%)

    2.1% to 10.0%

    42 (28.8%)

    431,325 (37.1%)

    0.0% to 2.0%

    72 (49.3%)

    124,596 (10.7%)

    Total

    146 (100%)

    1,161,730 (100%)

    Note: Includes top 146 funds only ranked on number of contributions in the last available quarter and is inclusive of exempt funds.

    Cost of contribution processing

    The total cost of processing reflects costs as reported by entities, not necessarily the true underlying cost of contribution processing for the whole superannuation sector.

    At a headline level, costs amount to about $139.6 million over the full year to 30 June 2018 and appear fairly stable from quarter to quarter.

    This total value translates into a total average unit cost of $1.01 per contribution processed across the whole sector in 2017–18, this compares to a total average unit cost of $1.07 in 2016–17.

    Table 11: Cost movement – quarterly, 2017–18 and total 2016–17

    Cost movement by quarter

    Total cost ($m)

    Total contribution volumes (m)

    Unit cost

    Quarterly trend

    September quarter 2017

    $35.1

    32.6

    $1.08

    12.4%

    December quarter 2017

    $35.2

    34.8

    $1.01

    -6.1%

    March quarter 2018

    $35.1

    33.7

    $1.04

    2.6%

    June quarter 2018

    $34.2

    37.3

    $0.92

    -12.0%

    Total cost 2017-18

    $139.6

    138.4

    $1.01

    n/a

    Total cost 2016-17

    $144.4

    135.1

    $1.07

    n/a

    Note: Data has been rounded to nearest decimal point.

    Cost per transaction has decreased to $0.92 per transaction (largely due to the increase in June volumes) for the June quarter 2018, compared to $0.96 at the same time last year, a decline of 4.8%.

    The June quarter 2018 unit cost figures show a significant 12.0% decline from the previous quarter, this is in part explained by the transaction volume increase suggesting that costs are predominantly ‘fixed’ in the short-term – at least as far as cost accounting methods are concerned.

    Costs are not uniform across the industry and scale is a significant, although not exclusive driving factor.

    June prior quarter figures are revised in later quarters where reporting errors are uncovered and data are resubmitted by entities but these refinements are unlikely to have a material impact on the overall picture now that four successive quarters have been reported.

    Table 12: Cost benchmarks percentiles by size of fund contribution volumes – 2016–17 and 2017–18

    Percentile

    2016-17

    2017-18

    20%

    $0.25

    $0.29

    30%

    $0.50

    $0.48

    40%

    $0.69

    $0.65

    50%

    $0.88

    $0.87

    60%

    $1.44

    $1.35

    70%

    $1.89

    $2.12

    80%

    $3.05

    $3.21

    The data indicates across the majority of percentiles, unit costs have fluctuated from the previous financial year indicating increases for some percentile and decreases for others. The largest decrease was in the sixtieth percentile range at 6.2%.

    Observations on short-term cost trends

    It is possible to observe some movements in costs over the reporting period using September 2015 quarter as a base and the YTD figures as a moving estimate. As volumes generally are increasing over the same period, this partly explains why unit costs have fallen over the 2017–18 period as a whole when compared to the previous year by around 5.9% after adjusting for the special factors impacting the June quarter.

    It should also be recognised that Channel C cost reductions are unlikely to fall in a linear fashion with declines in volumes. They are more likely to follow a step function – with some fixed costs not being able to be extinguished until volumes are quite small or reach certain critical thresholds. In other words, it will take time before Channel C reductions reach threshold levels and translate into cost reductions.

    There is emerging evidence of higher Channel A usage leading to material cost reductions amongst some entities (by comparing their costs over each quarter on a like for like basis). This needs to be tempered however by the parallel view that there is also evidence of the opposite trend amongst some other entities.

    A longer-term view on costs

    On a full year basis, total contributions processing costs reported by funds are around $140 million at an estimated average unit cost of around $1.01. Allowing for possible variations in cost methods used by each entity, the total annual cost could be better expressed as a potential range from $140-182 million (assuming a 30% uplift in costs to allow for higher end estimates).

    Some comparisons can be made with earlier reference points such as the Cooper Review in 2010. A high end estimate based on Cooper figures suggests that total industry costs for processing contributions could have fallen by $475 million (see estimate 1).

    A lower end figure suggests that the reduction could be more like $180-220 million (see estimate 2).

    Comparing the current year 2017–18 to estimate 1, indicates a 70% reduction in costs. Comparing the current year to estimate 2, indicates a 49% reduction in costs.

    Table 13: Total cost of contributions – by period

    Year

    Total costs of contributions

    Est. unit cost (average)

    Source

    2009–10 (estimate 1)

    $615 million

    $6.15

    Cooper Review

    2009-10 (estimate 2)

    $270-360 million

    $2.70-$3.60

    ATO Estimates

    2016–17

    $145-190 million

    $1.07-$1.39

    SRF711.0

    2017–18

    $140-182 million

    $1.01-$1.31

    SRF711.0

    The Cooper review – the review estimated contribution management costs at $1.25 billion per year out of $3.5 billion in costs related to:

    • member support
    • reporting
    • benefit payment services.

    We estimate at least 50% of contribution management were related to employer contributions processing.

    ATO estimates are based on ATO cost modelling derived from Rice Warner benchmarking (2010-2014), fund interviews and internal sources.

    SRF711.0 (2016–17) – estimate based on quarterly cumulative data to June 2017 and ATO cost lift factor.

    SRF711.0 (2017–18) – estimate based on quarterly cumulative data to June 2018 and ATO cost lift factor.

      Last modified: 20 Feb 2019QC 57663