There is potential for rorting in the Government’s plans to allow hardship early access to up to $20,000 in superannuation and only limited time to fix the regime, according to the founder and chair of superannuation research and ratings house SuperRatings, Jeff Bresnahan.
In a statement issued late yesterday, Bresnahan claimed the current potential for rorting the system is significant and there needs to be a winding back of the eligibility criteria.
“If, as a result of unnecessary claiming, some funds are forced to consider freezing withdrawals to protect their remaining members, what will the Government do then? This is not new. Every financial crisis has resulted in a small number of investment funds being frozen, although this might be a first for super funds,” he said.
Looking at the Government’s plan, Bresnahan said that for some of the most vulnerable people in society the Government’s message was effectively saying, "use your own super to tide yourselves over and by the way, you’ll need to take it out at a massive loss, which you can never recoup”.
He said that under the current proposal, tens of billions of dollars of assets could need to be dumped into declining markets, meaning that some Australians seeking their $10,000 “tax free” super payment in mid-April, could inadvertently get as little as 70 cents in the dollar against what they would have got just two months ago.
Bresnahan said that nearly all of the problems would arise because the eligibility criteria to access super were way too generous.
“This shotgun approach has the potential to come back and bite the Government, hard. The focus absolutely needs to be on those who truly do need access to cash, and fast. Quite simply, those displaced from their jobs due to this horrific COVID-19 virus. In reality, those in hardship. This shouldn’t be a self-assessment process for all Australians,” he said.
Bresnahan said SuperRatings was urging the Government to rethink its approach so that money could be delivered to those in need while protecting their retirement nest eggs.
The company has thrown up three proposals:
- Allow funds to take a loan out from the Reserve Bank of Australia, to meet all claims. This loan would be secured against members’ benefits and repayable after say five years. This would then allow members to recoup lost investment earnings. The Government is protected, the member gets emergency funding, and the funds don’t have to dump assets into a declining market.
- A variation on (1) but with the Australian Taxation Office handling all claims, making all payments and retaining the loan register. This is a cleaner payment portal and still protects the Government, the member and the fund.
- Protect funds against having to sell into declining markets by ensuring that payments are only made to those in genuine hardship (e.g. those who have registered as unemployed, have been stood down, etc. and remain so after four weeks). At present, on a self-assessment basis, virtually all Australians, employed or not, could potentially make a claim