Don’t treat your super as an ATM: Cbus

Cbus CEO David Atkin calls for a stricter verification process for people applying to access their super on the grounds of financial hardship.

David Atkin, chief executive of construction industry superannuation fund Cbus, at their office in Melbourne. Picture: David Geraghty.

Superannuation should not be treated as an automatic teller machine which can be easily accessed by members in need of money, the chief executive of construction industry super fund Cbus has warned.

Speaking at a round table on superannuation hosted by the Queensland Investment Corporation on Tuesday, David Atkin said there needed to be a stricter verification process for people applying to access their superannuation on the grounds of financial hardship.

He said Cbus was bracing itself for a “second wave” of application for early access to superannuation in the new financial year, which starts on Wednesday.

“We are planning for a second wave,” he said.

He said up to 20 per cent of Cbus members had applied to access their super fund money as a result of the federal government’s early access scheme, with total payments of some $1.2bn so far.  While this was lower than the $1.75bn that Cbus had originally estimated, he said there could be another strong wave of applications from the start of the new financial year as a result of the expected downturn in the building and construction industry.

“We are very concerned that as we move into the first quarter of the financial year, particularly as forward contracts in our industry have been surveyed as dropping off by 40 per cent by September, our members might come under further financial stress and want to access the scheme,” he said.

But he said there needed to be proper analysis of the criteria used for early release of superannuation.

“We have always had access to the superannuation system from a financial hardship point of view,” he said. “What was new was the criteria.”

He said some people applying for access to their superannuation were not eligible, even under the earlier early-access conditions ­announced by the federal government this year in response to the COVID-19 crisis.

Meanwhile, any future access to superannuation should only be for extraordinary financial hardship “and only when there is demonstrable financial hardship”.

“We need to avoid people using super as an ATM,” he said.

Mr Atkin said continued early access to superannuation “defeated the whole purpose of superannuation” which was to lock money up so it was available for people when they retired.

He was speaking as the industry gears up for a second wave of applications for early access to super.

Martin Fahy, the chief executive of the Association of Superannuation Funds of Australia, told The Australian that superannuation funds were “well-positioned to deal with the liquidity requirements” of the second round of super withdrawals under the early access scheme.

“We’ve had more time to prepare, equity markets have largely recovered and become less volatile, and other listed assets are open and trading,” he said.

He said the industry did not have “any reliable sense apart from pure speculation” as to how much the second wave of applications might be.

“But inevitably the ongoing supports and benefits from the government are critical to the number of people feeling the need to access early release,” he said.

Meanwhile, there was an “increased danger” that more people could drive their account balances to zero in the second wave, which meant they would lose their insurance cover.

Mr Fahy said people should be “think carefully before withdrawing funds”.

“The amount that people withdraw we suspect will be a function of where we are with the overall health crisis and how that is likely to impact the economic trajectory,” he said.

He said over half the applications for early release — around 1.3 million — had been made by people under the age of 35.

Many of these were younger people in industries particularly affected by the COVID-19 employment downturn, such as retail and hospitality.

“Older Australians have been less likely to access their superannuation as they often have other assets they can rely on and are more likely to be employed in industries less affected by the economic downturn,” he said.

He said superannuation funds which had members concentrated in public sector employment had low rates of early release, at 3 per cent or less of member accounts.

ASFA figures show that just over half of the applications for early access to super had come from men.

“Around 57 per cent of applications were made by males, which is well above the 51 per cent of wage and salary earners who are male,” Mr Fahy said.

A spokesman for REST, the industry superannuation fund for the retail industry, said the fund had extensive liquid assets and was “well-placed to complete payments for the second tranche of early release applications”.

The spokesman said the amount withdrawn by Rest members in the first tranche had been well within its forecast levels.

“We are comfortable with our financial position ahead of the second tranche,” he said.

“Our unlisted assets (infrastructure, property, agriculture, private equity and credit), which are typically considered illiquid assets, comprised around 28 per cent of the fund as at June 3, 2020.”

Financial Services Council chief executive CEO Sally Loane said the council continued to support the federal government’s early release of superannuation for those experiencing financial hardship as a result of the COVID-19 pandemic.

“We have seen with the first round of early release payments that this money has provided vital support to Australians in genuine need,” she said.

But she said the FSC urged superannuation members to consider both their eligibility for the scheme and the implications of withdrawing their super, including the impact on their retirement balance and on any insurance cover held within superannuation before they made their decision to withdraw more money from their super.

The FSC also urged the government to consider policy measures to help people who have made use of the early access scheme rebuild their superannuation balances when they were able to do so.