We should know by now that when the government goes after industry superannuation funds, the victims are likely to be ordinary Australians and the rival retail super funds sector — once upon a time controlled by the big banks, until the banking royal commission forced them to flee the wealth management sector in disgrace.
Its most recent attack was via early access to superannuation for — ostensibly — people affected by the lockdown, designed to disproportionately harm industry super funds with a greater weight in illiquid assets like infrastructure.
That was an advantage during the 2008 financial crisis, when employer and union-run funds performed significantly better than retail funds, but now intended to be used against them as members were encouraged to raid their super accounts for money to tide them over pandemic-induced financial difficulties.
Part of that narrative was that industry funds would be slow to pay members who applied for early access.
Such funds would be “named and shamed”, according to an Australian article, which identified industry funds Hostplus and REST as possible culprits.
Long-time retail fund advocate and Liberal Senator Andrew “virus guy” Bragg linked industry criticism of the early access scheme with fund illiquidity. Assistant Superannuation Minister Jane Hume, who has repeatedly described industry funds as “unholy”, accused the sector of seeking to delay early access payments by several months.
You can probably guess what happened next. With the scheme having run for over a month, it turns out the worst laggards for paying members under the early access scheme are … retail super funds.
According to the most recent Australian Prudential Regulation Authority (APRA) data, which covers April 20 to May 24, 1.6 million people have claimed a total of $12.2 billion under the scheme, with 94% of applications paid within APRA’s guideline of five working days — indeed, the average time to pay out an application has been 3.3 working days.
To give some sense of scale — and show how this really isn’t the major drama all sides portray it as — $12.2 billion in around five weeks compares to a quarterly inflow of contributions in the December 2019 quarter — pre-COVID, of course — of $29.3 billion.
According to APRA’s data, Westpac-owned BT Funds Management’s ASGARD Independence Plan Division Two had paid out nearly 7000 applications totalling $57 million — but only 46.2% were paid within five working days.
Diversa Trustee’s Future Super Fund paid out $12 million with 46.3% paid within five days. Its ING Super Fund paid out $49 million with 65% within five days (in fact, there are six Diversa funds that managed less than 90%, but it also had a couple of >98% performers).
OnePath Custodians’ Retirement Portfolio Service — until last year owned by ANZ, who sold it to Zurich — managed 78% for its $396 million. NAB’s MLC Super Fund achieved 89% for its $425 million.
Some major retail funds have performed well. Funds run by scandal-plagued AMP, which is perhaps desperate to avoid any more bad headlines, all managed over 98% while paying out nearly half a billion dollars.
Colonial First State, in which the Commonwealth recently sold a majority stake, managed over 96% for all its funds.
The worst-performing industry fund was Queensland hospitality industry fund Intrust, which paid out $112 million at just 55% within five days.
Media Super ($45 million) managed 75.7%. The corporate in-house fund of neoliberal darling Qantas managed just 61.3% in shelling out $42 million.
But most industry funds performed well. The meat industry fund managed 100% in paying out $22 million. Queensland giant Sunsuper achieved 99.9% in paying out a mammoth $1.25 billion. And Hostplus, identified by The Australian as a laggard? $1.2 billion at 95.9%. REST also managed 95.9% in paying out $1.1 billion.
Oops, that wasn’t in the narrative. Strangely, it’s mostly been left to finance industry publications to point out who is performing or not performing.
What was also missing from the government’s plan was for the scheme to be abused by identity thieves, who have stolen tens of thousands of dollars, and potentially much more, from unknowing account holders.
It was industry super’s warning to government about exactly that security risk, and the need for tighter checks, that Hume initially portrayed as trying to slow down the early access scheme.
Asked by the ABC’s 7.30 last night if she regretted ignoring those warnings, Hume doubled down and repeated her accusation that industry funds were trying to slow the process down, though at least she refrained from describing them as “unholy”.
It’s also clear that a significant proportion of those accessing their funds had experienced no loss of income, or were using it for discretionary spending, not essentials — again reflecting Hume’s poor scheme design, with the ATO not requiring applicants to verify that they’ve lost their job or suffered a major income fall.
The prime minister yesterday waved away any problem with people blowing their retirement nest egg on gambling or alcohol.
“It’s their money. I don’t go around telling people how to spend their own money.” A peculiar thing to say about a compulsory superannuation scheme, but then the Liberals don’t believe in that anyway.
Sitting on their donor’s laps – the difference between this government and other ventriloquist’s dummies?
Charlie McCarthy had the sense to admit he was made of wood.
Let’s face it, the Coalition would rather pay/withhold pensions/welfare. The more plebs reliant on that in years to come, the happier they’ll be.
A point that was well made on The Drum last night is that few people really understand superannuation and how it works. I have two really well-educated and otherwise sensible retired women friends who leave the entire management of their superannuation to their husbands – they simply refuse to come to grips with it.
The government’s willingness to label it “your money that you are being denied access to” works so well because of this widespread failure of understanding.
In retirement I draw streams of income from two industry schemes and this has worked very well for me. I understand how it all operates because my last job required me to send my employer’s fortnightly payments to UniSuper on behalf of the thousands of employees.
Some public education programs are sorely needed although this government, with its anti-industry schemes attitude, is not going to provide those.
The question I would like answered is what all this withdrawal is costing those who don’t draw funds? Where illiquid assets are concerned have current valuations been used in determining account values or do I suffer down the track when these assets are correctly valued at possibly a great deal less than they are on the books currently.
The sale of any asset under pressure is unlikely to produce the best price but even though I stay in the fund I still suffer the loss.
Long term asset, should have been left alone.
Veritas…I believe that all the funds did a full asset revaluation prior to the commencement of early payouts, for precisely the reason that you were concerned about.
Yes well put MJM. It’s often said the gambling industry preys on the mathematically illiterate. Same with much of the finance industry.
A lot of people are also ideologically disposed to believe super is a scam of one sort or another.
The feds are also financially conflicted with these withdrawals most of which are taxable and taxable now.
Bernard,
Your piece today is welcome, as is your general analysis of the cultural war directed at industry funds by a government embarrassed by its ‘friendly funds’ in the retail sector being such poor performers, except when it comes to Royal Commission appearances.
One factual matter: Media Super has so far paid out approximately $50 million to more than 6000 members. Yes, we appear on APRA’s attempt at a ‘shame file’ as being compliant 65% within the government’s five day arbitrary limit for release of funds.
Why? Well on the first day of the scheme, when we dealt with close to 1000 files which came from the Australian Tax Office with simply name of member, TFN, date of birth and bank details (which we do not keep), we challenged several with inconsistent data to our own records because we were concerned that scammers were targeting the scheme.
Despite our best efforts, the first tranche arrived at the banks (with the questionable ones removed) for dispersal at 10.30am, not the 10am bank daily cutoff. So we are now ‘only 65% compliant’.
Almost a month later Of daily releases, there have been no similar Incidents, though we regularly question the data coming from the ATO.
Meanwhile we know that – despite Minister Jane Hume’s assertion on 7.30 Report that ‘the agency’ (i.e the ATO) may be liable for any scamster losses – we’ll be on the hook. We know our Trust deed all too well and the ATO has made it abundantly clear that the funds themselves will be obliged to make up losses. Who bears that? Other fund members, that’s who.
Regards,
Gerard Noonan
Chair Media Super
“I don’t go around telling people how to spend their own money”
Must have forgotten about the Indue card.
Is it just me, or do other people immediately see either a malevolent political agenda or a rort in pretty much every pretence at a stimulus measure this corrupt government makes?
Super access – a direct attack on industry super funds (and their members)
Jobkeeper – not unlike the sports rorts in its channelling of funds to its voter and donor base
Housing grants – to the voter and donor base for houses that would have been built anyway: would be so much better to build social housing so at least maybe some homeless get some stimulus – eventually
Seems to me the only good one was jobseeker, so of course that will be axed as soon as it’s convenient.
Spot on Lee. Not forgetting the manipulation of job keeper to ensure that only private universities can access it – a clear sign of the agenda the liberals want to impose once the pandemic has brought the rest of the sector to its knees.
In my heart of hearts, I do not think I am entitled to the Jobkeeper monies I will potentially receive in coming months. My accountant says just take it; full marks to him for filling out the forms correctly. I may be looking for a good cause soon. Cobargo?