Financial regulator warns superannuation funds on early withdrawal payment delays

Superannuation funds are racing to hand over cash after more than one million Australians applied for early withdrawals. But those who delay payments face serious consequences.

Super funds have been put on notice to hand over money to early release applicants within five days or face the consequences.

Some furious applicants have complained to funds and on social media for being unable to access their money within the five-day guideline.

The financial regulator, the Australian Prudential and Regulation Authority’s (APRA) deputy chair Helen Rowell, said funds were doing everything they could to process applications quickly to ensure cash-strapped people were receiving their money.

APRA chair Helen Rowell said funds should aim to process applications within five working days.

“Trustees should be making these payments as quickly as they can but also we accept it's important that you allow flexibility for things where that is just not possible,” she said.

“There could be a mismatch of the data the Australian Taxation Office has relative to the data the fund has on an individual member.”

Ms Rowell said APRA had a range of measures it could use to penalise funds which did not process applications within a timely fashion.

“We would need to think about whether we put some condition or obligation on a fund,” Ms Rowell said.

“It depends on the seriousness of the issue and whether it just involves a firm word … this gets a lot of traction.”

She said of all applications sent to funds, 95 per cent get processed almost automatically, while only five per cent fell outside this.

Mr Rowell said the guidance is funds have to release the money within five business days or “as soon as practicable”.

New data from APRA showed in the first week of the scheme opening the following happened:

• Funds received 665,300 applications for early release.

• 162,900 applications were processed by the fund.

• Members were paid $1.3 billion in total or an average of $8003 per person.

More than one million Australians have rushed to access their superannuation early.

While latest figures released on Friday show since the giant $3 trillion retirement kitty opened up more than 1.04 million applicants have accessed money totalling $8.38 billion.

Under the scheme those who have had a significant drop in income or been made redundant this year can access $10,000 this financial year and another $10,000 next financial year.

The Australian Institute of Superannuation Trustees’ chief executive officer Eva Scheerlinck said funds were working around the clock to support eligible members.

“In most cases funds are making payments within the five day deadline, however a small proportion of members may experience a payment delay,” she said.

“This may be due to their fund’s automated checking identifying that additional fraud or other verification steps are required.”

The Australian Financial Complaints Authority has received 1180 complaints relating to the COVID-19 pandemic and of these 51 of these complaints have related to super.

To apply go to the myGov ATO online services, go to the super menu, select “Manage” then “coronavirus release”.

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Originally published as Financial regulator warns superannuation funds on early withdrawal payment delays