APRA probes super fund pain

Regulators are ramping up surveillance of super funds to assess the damage done to Australia’s $3 trillion retirement pool by COVID-19.

The prudential regulator is ramping up its surveillance of superannuation funds to assess the financial damage done to Australia’s $3 trillion retirement pool by COVID-19.

In a letter issued to the country’s wealth funds, the Australian Prudential Regulation Authority said it would introduce a pandemic data collection regime in an attempt to identify pressures on investments and funds under management.

APRA’s decision to increase its oversight during the pandemic follows moves by the Australian Taxation Office to crack down on the rorting of COVID-19 financial relief measures for tax benefits, in particular the federal government’s early release of super scheme.

Researchers at the Grattan Institute have warned that vetting processes for eligibility to withdraw super early need to be strengthened, as the framework allows individuals to claim payment with no initial checks.

Grattan’s household finances director Brendan Coates said the application process involved a self-declaration of financial hardship, and the federal government should bolster the rules for the second wave of claims expected in the coming financial year.

“While the ATO says it will crack down on those that did access the scheme without cause, it’s a problem that can be avoided for the second stage,” Mr Coates said.

“The commonwealth government should revise the eligibility criteria for the second tranche of withdrawals to require applicants to demonstrate they meet the eligibility criteria before the money is released.”

Australia’s superannuation sector has suffered multiple financial ruptures during the economic downturn sparked by the virus, with investment portfolios shrinking as markets tanked.

The early release of super scheme has added to the financial outflows, with nearly $16bn being drained from the retirement pool by more than two million Australians.

JobKeeper payments are also impacting the inflow of funds, as the government-paid subsidy does not attract superannuation contributions. Latest figures by Treasury show that approximately 3.3 million workers are receiving wages through the scheme.

Mr Coates noted fiscal responses to the pandemic had become less time-sensitive and that getting money to households as quickly as possible was no longer the top priority.

“We’ve come a long way since March and the balance of risks has changed,” he said.

“Withdrawing super isn’t a step anyone should take lightly. But it’s better than defaulting on your mortgage come October when mortgage deferrals come to an end.”

APRA’s pandemic measures are intended to provide regulators with information regarding funds’ liquidity positions and operating resilience through the downturn.

It said data gathered will help gauge the impact of super withdrawals on certain age and income demographics.

Funds will have to provide monthly data to APRA and ASIC.