The Government’s early release superannuation scheme enabling members to access up to $20,000 of their retirement savings to get them through the COVID-19 crisis has been a key source of funding for more than 1 million Australians in need.
Implementing the scheme was no small feat.
The challenges before the industry stretched to almost every corner of fund operations – from call centre staff juggling record high call rates; admin teams making significant system changes to process an unprecedented volume of payments; risk teams on high alert for early release fraud; through to liquidity management at the investment desk, and all while large portions of the organisations work remotely.
Vicky Doyle, chief executive of Rest Super whose fund has processed more than 100,000 early release payouts – many for those working in the hard-hit retail sector – recently put these challenges into stark perspective.
In a normal week, Rest might process 100 early release requests. In the first week of the government’s early release scheme, that number had risen to 65,000.
Importantly, Rest and most other super funds are managing these challenges effectively. Across the industry, 95 per cent of the 1 million-plus payments made have been processed within the five-day timeframe set out by the government and regulators.
But super’s contribution to Australia’s response to the crisis is much broader than just processing early release payments.
As was the case during the global financial crisis, super funds have a valuable role to play in supporting financial markets and Australian businesses, which face credit-tightening both here and across international markets. We’ve already seen evidence of this in recent weeks with funds assisting a range of companies including Ramsey Healthcare and National Australia Bank in the form of capital raisings and equity injections.
Despite the pressure of having to meet the rush of early release requests from members, profit-to-member funds have good liquidity– a situation that will build as compulsory super contributions continue to be paid.
Rainmaker estimates that right now profit-to-member funds hold around $500 billion in cash and liquid bonds.
Our sector is already engaging with federal and state governments on potential partnerships to finance innovative investments that will contribute to growth, job creation, productivity and higher future standards of living.
Industry and public-sector funds, in particular, have a strong track record of investing in ports, airports, rail, renewables, aged care, and other infrastructure projects. Profit-to-member funds have also led the field in investing in areas like venture capital and providing capital to Australian business. Recently we’ve seen leading business identities including Australia’s richest man, Anthony Pratt, and venture capitalist Mark Carnegie call for super funds to do more on this front.
In a similar vein, the Victorian Farmers Federation (VFF) has called for the Victorian and Australian governments to develop an agriculture investment strategy that will incentivise Australian superannuation funds to invest in the agriculture industry. Others have called for super funds to allocate more money to affordable housing.
But the capacity for super funds to invest for the long term requires stable policy settings.
A long-term investment framework for superannuation not only delivers the best retirement outcome for members through higher returns, but it also allows funds to invest in nation-building assets. In doing so, Australia’s $3 trillion super savings pool can play an important part in the country’s economic recovery from the pandemic.