Funds get five days to hand over cash under early access

APRA has ordered super funds to hand over early release payments within five days of a determination by the tax office.

New figures out on Friday are expected to show a jump in the number of people registering their interest in drawing down as much as $20,000 from their super savings.

The prudential regulator has ordered super funds to hand over early release payments to members within five days of a determination by the tax office, amid expectations more than 1.5 million savers will flood the myGov website when applications for the scheme open on Monday.

The edict comes as new figures out on Friday are expected to show a jump in the number of people registering their interest in drawing down as much as $20,000 from their super savings.

The Australian Prudential Regulation Authority on Thursday set out its expectations for the industry in processing the payments, but conceded timeframes may blow out if super funds come under pressure from high volumes of applications.

In exceptional circumstances, where red flags are raised due to potential fraudulent activity, or further verification steps are required, or where the payment is being made from interests held in defined benefit funds, the regulator expects payment may take longer than the five business days.

Even in such cases, it expects payments to be made “as expeditiously as possible”.

“APRA acknowledges that these timeframes may extend slightly where an RSE licensee experiences a high volume of applications at any particular time,” the regulator said.

Assistant superannuation minister Jane Hume welcomed the guidance from APRA and said the government expected super funds to pay members as quickly as ­possible.

“We understand this is a very challenging time for all Australians,’’ she said. “These measures will ensure that Australians impacted by the COVID-19 pandemic will receive this vital financial support as quickly as possible.

“This is an opportunity for the super funds to demonstrate their commitment to their members at the time they need it the most,” she said.

Figures released last week showed 617,800 workers had registered their interest in accessing up to $10,000 of their savings by June 30, with a further $10,000 available to be drawn down from eligible accounts between July and October.

The government initially forecast 1.3 million savers would seek early super access, but there are growing expectations the final figure could be much higher.

While the government has forecast about $27bn will be drawn down under the scheme, the $3 trillion superannuation sector fears the total could be north of $50bn, which would pressure some smaller cash-starved funds to engage in a fire sale of assets — further lowering the value of already depressed asset values — or liquidate out of positions in long-term positions in infrastructure or property holdings.

Some parts of the funds management sector have lobbied the government to allow the Reserve Bank to supply extra liquidity to the sector as super funds strain under the pressure of investment markets crumbling.

The nation’s largest superannuation fund, AustralianSuper, is gearing up for 300,000 of its 2.2 million members to apply for early access to their savings.

“We expect to be able to process the vast majority of applications within the five days,” an AustralianSuper spokesman told The Australian.

The fund expects to process 90-95 per cent of early release payments within the five-day deadline, with the remaining 5-10 per cent facing delays if a “red flag”, such as possible fraudulent activity, shows up. A data or information mismatch between the ATO and the super fund may also delay payment, the spokesperson said.

Industry funds Hostplus and REST, which have membership bases concentrated in the hard-hit hospitality and retail sectors, also confirmed they expect to be able to process the payments within the five-day deadline.