Industry superannuation funds disemboweled by young Aussies

According to The AFR, nearly one million Australians have already registered their interest to access up to $20,000 of emergency funds from their superannuation accounts, representing nearly two-thirds of the Morrison Government’s forecast of 1.6 million people:

A total of 975,300 super members registered early interest in the ATO scheme before the April 20 start date. The government expects about 1.6 million to make use of the hardship access.

This weekend, it was revealed that the Australian Taxation Office (ATO) has approved 456,000 of these applications, averaging around $8,000 and totalling $3.8 billion.

These funds will require payment by superannuation funds over this coming week.

Industry superannuation funds are being hit particularly hard, suffering triple the withdrawal rate of retail funds:

The influx of applications to industry funds so far is almost three times the volume experienced by bank-owned and retail funds, despite being only 17 per cent larger in its total market share of assets under management…

Not surprisingly, industry funds operating in the hospitality, retail and travel space have been hit hardest from young Australians that have recently lost their jobs:

A call-around by Money Management revealed that most superannuation funds have received at least 200 to 300 early release requests with more than half coming from younger members with low balances…

The superannuation funds dealing with the highest numbers of applicants (in the tens of thousands) were those in the travel, hospitality and retail industry such as Hostplus, Clubplus and REST…

The Grattan Institute’s latest unemployment projections show that these industries will continue to be hit hardest from the COVID-19 economic collapse, with between 25% and 75% of workers losing their jobs:

Therefore, these early withdrawals could merely be the tip of the iceberg for the industry superannuation sector, which faces further heavy withdrawals of members’ funds.

This could pose an acute liquidity problem for some industry funds, namely those that have operated on the erroneous assumption that their younger member bases would not withdraw their funds for decades and that they would continue to receive ongoing inflows via the compulsory superannuation guarantee.

Based on these assumptions, some industry funds have invested heavily in illiquid assets like infrastructure and private equity, which now may have to be sold at depressed prices.

This explains the incessant lobbying by industry super funds for emergency liquidity support from the Reserve Bank of Australia. They want to be bailed out for poor risk management.

Leith van Onselen
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Comments

  1. Applied last Monday, ATO confirmed approval Wednesday but still no dollars or contact from my super mob (intrust) sister is in the same situation (hostplus). I saw a few MB posters last week with other funds got paid out straight up. Interesting to see the difference in timing.

  2. “.. This could pose an acute liquidity problem for some industry funds, namely those that have operated on the erroneous assumption..”

    Erroneous assumption?

    I think you mean ..operated on the assumption that laws would not be changed by a cynical conservative government eager to demolish superannuation for low income workers.

    But everyone knows the best thing for the jlittle people in their old age is dependence on government rations dished out by middle class paper shufflers who know best.

    • Thanks for saving me a post, pfh. You are exactly right.

      A side effect that the Libs* will smile about is if the industry superfunds are forced to disgorge the sensible long-life assets that appropriately matches their liability profile for pennies in the dollar, to be acquired by the shufflers and vultures.

      *i will find this pretty funny too, even if it’s wrong.

    • While I’m never one to dismiss a potential conspiracy, it’s quite the long bow to assume ‘the libs’ manufactured access to super in order to specifically target a subset of industry funds…. come on? “It’s my money why can’t I have it” is exactly what the retail punter wanted, the sheer volume of people accessing it proves it’s a vote winner, or a the very least, not a vote loser (What was alternative? The treasurer standing on TV telling people whom can’t afford food or rent to think of the long term?)

      That aside, I am absolutely +1 for the “operated on the erroneous assumption” call. That’s compete crap and is coming across as a MB Super sales pitch as this point. Lets rewind 2 years, would MB have endorsed mass withdrawals from industry funds to retail funds on the basis of “there may be a liquidity squeeze at some point so come pay me retail fees”? No, they wouldn’t have, it would have been the subject of a “scum bag banks” article.

      Though now MB has a fund to market, not so bad right……

    • +1

      This is just about enabling the usual upwards wealth transfer for assets which would normally be untouchable.

  3. Chinese Plague

    Can’t get it and don’t need it.

    I go you one better.

    I’m on the books for a small business getting $150 per week for many years. It’s maybe 6-8 hours of work per month maximum. Getting Jobkeeper from it you beauty.

      • Ah, now you are beginning to see.

        Tony’s Tradies will be doing alright. Any bruvva with an ABN will be doing alright.

          • Do people have multiple TFNs? There are so many things I need to learn about being dodgy. I guess you can sign up the wife, the retired dad, yeah.

        • ErmingtonPlumbingMEMBER

          Not if your last financial year was a slow year (like mine) and this financial year was booming up untill the end of march.
          Etith invoices being paid into April I don’t qualify with the required 30% in year on year or quarter on quarter drop.

          Yet my volume of work is only now seemingly cut in half.

          Year on year May and June will definitely be 30% down (biggest months of the last financial year) and compared to Jan-March its looking like it’ll be 30% doen there also.
          Im not even sure If i can start claiming by then though.
          Can I?
          Im expecting my CBus 10k this week.

      • Chinese Plague

        If I had a full time salary job I wouldn’t be eligible for Jobkeeper from this business.

  4. Who will buy the illiquid assets? Chinese companies and CCP SOEs perhaps? Oh dear.

    Considering the tax effectiveness of superannuation, I cannot understand why anyone, especially under 50 would even consider withdrawing right now. Decimated unlisted assets aside, the ASX 200 has just handed back all its gains since early 2016. CBA is below it’s pre GFC high. NAB has handed back all its gains back to its 1996 share price.

    The current unemployment benefits are adequate to survive. If you genuinely can’t pay your rent, you don’t really have to and not be evicted. If you can’t pay your mortgage, you can get a mortgage holiday. If you’re a specufestor, you can sell your properties.

  5. few bn dollars is like drop in the ocean
    what is going to hurt them more is end of inflow due to unemployment

    it’s going to be hard to pay BBs who are retiring with lump sum withdrawals

  6. To be fair everyone wants a bail out, it’s just how you choose to characterise it and the agency you attribute people.
    Jo and Joanne Schmo are on a rent strike. They have no savings but the latest iPhone and a recent trip to Bali at Christmas.They are victims.
    Industry super funds didn’t plan for a pandemic and a Liberal government suddenly altering the withdrawal rules. They are negligent.

  7. The Grey Rider

    “Based on these assumptions, some industry funds have invested heavily in illiquid assets like infrastructure and private equity…”
    And going by the weekend papers, CBUS (and no doubt other funds) intend to invest even more super money on these illiquid assets…

  8. The real estate industry has got to be behind this. It’s the only conclusion that makes sense.

  9. Given the average withdrawal was $8k it would seem a few have cleared their account and won’t be back for a second bite after June 30.

  10. Some perspective. If 13m workers all took out $20,000 that’s $260b. Or around 9% of the 3 trillion dollars in the system. I think the system will be ok…

  11. thought – what if you took the funds out and bought gold/ silver. Alt argument – leave it in Super environ but move to SMSF and buy – conter to that fees.