How super early access has staunched the SG rivers of gold

30 July 2020

The superannuation funds worst hit by the Government’s hardship early release scheme have seen declines of between a quarter and a half in their growth in funds under management (FUM).

Analysis of the Australian Prudential Regulation Authority (APRA’s) latest data shows that for some of the worst-hit funds, the early release outflows combined with job losses amongst their members have significantly offset the benefit of their superannuation guarantee (SG) inflows – something which is likely to impact on APRA’s future heatmap analyses.

The latest APRA data relating to one of the most-affected funds, HostPlus reveals the fund has paid a total of $2,542,472,958 in both initial and repeat early access applications with its latest annual report (2019) stating that it had $44 billion in FUM – an increase of $11 billion over the previous financial year.

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Thus, for Hostplus the amount so far taken in early release superannuation represents nearly 23% of the amount by which it increased its FUM in what represented a normal year.

Similarly, for REST the fund has so far seen $2,651,914,716 withdrawn as a result of the early release regime in circumstances where its latest annual report (2019) showed it had $56 billion in funds under management up from $51.6 billion the previous year – meaning the early release drawdown had also significantly hit its FUM growth.

For HESTA, $1,420,436,488 was taken in hardship early release withdrawals which given its FUM of $50 billion which increased by 13% over the prior financial year, the situation was less significant.

APRA has consistently pointed to 10 big funds having been most affected by the early release regime – AustralianSuper, REST, Hostplus, Cbus, Sunsuper, BT, HESTA, MLC, CFS and AMP.

The data analysis around the manner in which early release is eroding annual growth in FUM has come at the same time as superannuation fund executives have confirmed that while there was a significant spike generated by the 1 July start to the second tranche of the early release regime, this had now significantly tapered.

They said that they expected that more moderate numbers of early access requests were now expected, not least because the Government had extended the early release regime until the end of December.

“I believe a lot of people no longer feel pressured and will wait to see how economic events play out before deciding whether to use the early access option,” one executive said.

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The Industry Funds are screaming at the moment because many of their members have accessed funds.
Whilst not casting judgment on whether or not the purpose of the withdrawals were necessary or used for discretionary spending on non essential goods, the fact is that when you have vast numbers of members who are not engaged and have not sought advice they will make their own decision if provided with the opportunity.
For many, it may have been a case of financial survival and for others it was a reason to treat themselves.
Many Industry Fund members never seek comprehensive advice until approaching retirement and therefore are not
"superannuation educated ", even though the Industry Funds still charge them an annual cost for access to Intra-Fund advice.
If they don't access it, they are still paying a fee to cover the cost for all the members who do choose to access.
Many of these members would never know they are being charged a fee for the access despite the disclosures.
Many of these members would never read the disclosures or assess the fees charged.
Bernie Dean was this morning commenting on the long term impact of these withdrawals on future retirement security and the impact on Social Security and increased taxes, but we all know that when the Industry Funds channel tens of millions of dollars into trade union and Labor Party related coffers each year, the concern for many of them is about a reduced ability to feed their masters.

Apparently Treasury has revised its estimate about how much money will be withdrawn from the super system from $29.5bn to $41.9bn in light of the take-up of the early ­release scheme, the decision to ­extend it until the end of the year and the economically crippling second lockdown in metropolitan Melbourne.

That's about a $420 million pa saving in admin fees, primarily from the compulsory default based super funds. These fees includes payments to their intrafund marketing reps, who are collecting annual ongoing bonuses, without any informed consent being provided by their fund members for these "advice" fees most never receive.

So quite a logical move to unlock funds to reduce their home mortgages, instead of funding the bonuses of 1000 marketing reps (primarily engaged by Industry funds).

And these marketing reps are licensed as "financial planners." Wow.

And have the same qualification, best interests, FASEA exam etc., requirements as all other financial planners on the ASIC register. Some of these funds have done the right thing and their "marketing reps" have full conversations and refer on where further advice is required, whilst other funds remain a single advice domain and the conversation is limited, not addressing obvious needs of the member. It's disappointing to see one of the majors that had progressed, now move back to that single advice domain due to increased member demand and waiting times for appointments

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