Critics slam policy allowing early emergency access to super


“There has to be a more direct payment going to the people being affected – some kind of wage subsidy arrangement. These people shouldn’t have to rely on the goodwill of employers to keep them going or on their retirement savings,” he said. The government has also increased JobSeeker payments to those who find themselves out of work.

Former Superannuation Minister Nick Sherry ruled out early access to super during the global financial crisis on the basis it would impact liquidity of the funds.

While Mr Sherry acknowledged funds had made efforts to increase cash buffers since the GFC, the super sector was facing a triple threat – high unemployment cutting inflows, extreme market volatility causing members to rip money from equities and, now, early access to super threatening capital.

“It only needs one fund to freeze and that would damage not just that fund but the broader system,” Mr Sherry said, adding the industry will be a vital player when it comes to kick-starting the economy on the other side of the coronavirus slump.

Cbus chairman and former Victoria Premier Steve Bracks called on the RBA to provide super funds with “short-term liquidity support which could, of course, be paid back by the funds in the coming years, quite easily”.

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The government has forecast 1 per cent of assets held by super funds will be affected by the changes but Mr Bracks said this number was “rushed” and “inaccurate”, claiming it would likely be at least twice that number and would cost his fund $8 billion.

“It’s achievable but we don’t want to be in a position where we’re selling stocks at the bottom of the market,” he said.

Mr Bracks supported the policy generally as many people were struggling, adding there would be a higher than expected uptake of the scheme.

Senator Andrew Bragg said it was a “sensible, prudent approach” and the argument it would hurt lower-income people the most “doesn’t stack up” as those on an average super balance were eligible for the full age pension.

“This is the workers’ money, this is the rainy day,” he said.

“It’s a sound policy, I don’t think anyone can argue it’s ideological.”

Professor of Finance at the University of Melbourne, Kevin Davis, has presented one solution to Treasury that has gained traction within the sector. Rather than drawing down on super when the market is at a low and locking in losses, allow people to borrow against their super assets at a zero interest rate with repayments to the super fund starting once the market bounces back. The super funds borrow from the RBA for the initial capital, using super fund assets as collateral.

“Given the current ultra-low level of interest rates, and with strong collateral making the repo loans virtually risk free, that is not unreasonable in the current troubled times,” the proposal sent to Treasury claims.

Mr Davis also doubted the early access to super scheme was ideological.

“You could interpret this as being one sort of attempt to plank by plank dismantle the size and significance of the industry funds,” he said. “But I think that’s a long bow.”

Super funds worked to a mantra of “the bigger the better”, Mr Davis said, and executives had financial incentives tied to ensuring funds under management was not reduced. “Hence they’ve all been in favour of raising the contribution rate from 9 to 12 per cent,” he said of the Retirement Income Review.

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