Super funds demand regulatory discount equal to early release outflows

28 July 2020

The Federal Government should reduce levies imposed on superannuation funds because of the manner in which they are dealing with the COVID-19 pandemic.

In fact, the superannuation funds want the levies they pay the Government reduced by an amount proportionate to the amount of funds which have been withdrawn from the industry under the early release arrangements.

That is the bottom line of an Association of Superannuation Funds of Australia (ASFA) submission to the Australian Securities and Investments Commission’s (ASIC’s) latest funding proposals.

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In that submission it states: “ASFA considers that total levies on the superannuation industry should be reduced due the impacts of the COVID‐19 crisis.

“The expanded early release scheme in response to COVID‐19 has led to a substantial reduction in the assets of APRA‐regulated superannuation funds – ultimately, it is expected that total payments under the scheme – as presently designed – will be over $30 billion.

“The Federal Government’s expanded early release scheme in response to COVID-19 has led to a substantial reduction in the assets of APRA‐regulated superannuation funds,” it said.

“Since the inception of the expanded scheme, funds have made payments totalling $25 billion (to 12 July 2020). It is expected that total payments under the scheme – as presently designed – is likely to be much higher (over $30 billion).

“The impact on APRA‐regulated funds has not been homogenous. Funds with members who are in industries particularly affected by the crisis have been disproportionately impacted. Not surprisingly, funds which have a heavy concentration of members employed in hospitality, restaurants and clubs have the highest rates of early release so far, at between 15% and 20% of the accounts in such funds.

“As such, ASFA considers that total levies on the Superannuation trustees sub‐sector should be reduced – by a similar proportion as the reduction in total superannuation assets from the expanded early release scheme,” the ASFA submission said.

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I am a one person operation, with my own licence. If the super fund industry gets lower regulatory fees while mine have increased disproportionately to my business income (which has been more than halved thanks to loss of grandfathered commissions now being retained by financial institutions) then there is no justice. The super fund industry needs to pay it's way like the rest of us have to, regardless of their total FUM.

The grandfathered commissions paid to you was never yours in the first place. Ongoing remuneration paid to financial advisers / planners, for which 97.5% did nothing to earn it on an ongoing basis. The money had to come from somewhere and the investment managers never paid this out of the goodness of their hearts. Ultimately it was at the expense of the client.

Actually Jefferson, the ongoing income stream for my business (grandfathered commisions) were part of a contract signed between the financial institution and the client, so yes they were a cost to the client, which was properly disclosed to them and which they were happy to sign up for. My grandfathered commission were mostly relating to lifetime annuities, which back in the day (pre 2005) were being used to access increased age pension benefits for clients. So it was a win-win-win. It's only in latter years that opinion has swung against such payments. Have you not followed the debate in recent years on this matter?

Yes, and now the Union based Super funds, with their "intrafund advice" marketing commissions, is operating the "new grandfathering", charging fees without informed consent, no contractual agreement, no way for their members to opt out. The hypocrisy here is breathtaking.

So you are telling me an enormous fund with billions of dollars invested is struggling to cover costs given they've lost 2% of their fum (eg. Hostplus reports $1bn withdrawn & they are a $46bn fund). Ok all funds are different, no issue there. But if you can't run your fund given a 2% drop in FUM then perhaps you need to look at your business strategy !!!!!

The regulatory levies are a function, among other things, of fund size. So if fund size falls, there is an automatic adjustment. ASFA wants to perpetuate the myth is the taxpayer who must otherwise fund regulatory activity is some alien apart from its members, employers and advisers?

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