Via Domain:
Some of the nation’s largest superannuation funds have the power to delay or suspend withdrawals but the industry has dismissed concerns about a freeze on redemptions as the sector braces for the government’s early access scheme.
Hostplus, Rest, Unisuper, Cbus, and MediaSuper all have variations of a clause that could enable the fund to suspend payments to members in a range of circumstances.
Peak body Industry Super Australia claimed there would be no reason the sector would not be able to meet demand for the government’s emergency scheme, which allows people who have lost their job or 20 per cent of their income to withdraw up to $20,000 from their super.
“Our funds are prepared to meet the demands of the early access to super scheme in any scenario, we will be looking after those that need to access their savings, and those that don’t,” ISA chief executive Bernie Dean said.
So why this then? Previously via AFR:
When AustralianSuper chief executive Ian Silk puts the case for possible Reserve Bank of Australia liquidity support for industry super funds, he points to the fact that the financial system is in unchartered territory.
He says if the Treasury’s estimate of a $27 billion drawdown of super savings by millions of Australians proves accurate, the industry will probably sail through with no liquidity issues.
But if Treasury is wrong and the figure is more like the $40 billion to $50 billion estimated by actuaries Rice Warner Silk, there will almost certainly be industry funds in need of emergency liquidity.
“I think any discussion about it, including Murray’s comment about moral hazard, has to be seen in the context that as far as I see it, this has never happened before, that people have been able to take significant amounts of money out with virtually no notice,” Silk says in an interview with Chanticleer.
MB is not an unbiased observer given we run super via SME accounts that are individually held so we can never lock anybody out.
As well, the government has changed the rules mid-stride here so some sympathy is warranted.
Still, we think that a business based upon the mandated flow of savings should NEVER have a liquidity issue. If some funds have gotten over-leveraged owing to a failure to manage the business cycle then they should cop it sweet. Sell assets, crystallise losses and face up to their poor performance with members.
All interests make this same “black swan” claim every time they mismanage a cycle. The shocks are always different but the cycle is always the same. Regulatory risk is constant as well.
So, getting access to the RBA for emergency liquidity does not add up. These are not systemically important institutions. They are industry funds that over-extended themselves to feed big bonuses.
Only market forces will shift members to better funds and better returns in the future.
Let industry superannuation funds burn.
