Superannuation, the ultimate government cash cow?

[sptrawler]

Here is another reason I started my own SMSF, it is o.k for political parties to try and force you into retail or industry funds, but that doesn't make it right. This article shows, it isn't really your money, you just think it is IMO. Well worth reading the whole article IMO.
Maybe a look into the infra structure exposure and why the high exposure, is warranted? Maybe a tip of the iceberg moment unfolding?

https://www.smh.com.au/business/ban...suspend-cash-withdrawals-20200407-p54hqc.html
From the article:
The $44 billion superannuation fund representing the hospitality industry has updated its product disclosure statement to highlight its "absolute discretion" to "suspend or restrict" applications for cash withdrawals, despite defending its ability to pay out the government's emergency early access scheme.

Hostplus has altered a clause in its PDS that will be relevant to a large portion of its members without any warning. Previously, the clause had told members they can switch between investment options and it would be processed within two days. The amended clause reveals the fund has total power to halt payouts at its discretion.

"The trustee may suspend or restrict applications, switches, redemptions and withdrawal requests for all or a particular investment option at its absolute discretion. In such circumstances, transactions may not be processed or may be processed with significant delay," the updated clause on page 62 of the 215 fund's product disclosure document said.

"The trustee may also decide to process a transaction request for a particular type of benefit from a suspended, restricted or closed option on a case by case basis. Any decision about whether to process transactions from such an option will be made in the best interests of investors as a whole.
"All impacted transaction requests will be processed using the effective unit price applicable on the date the suspension is lifted, or the date special approval is granted if earlier."

Hostplus says the trust deed – a legal document setting out the terms and conditions for managing a trust – had always enabled the fund to suspend redemptions.



Hostplus is the industry superannuation fund for employees in hospitality, tourism, recreation and sport. Join now and get super informed.

 

[Dona Ferentes]

There's an article about some SMSFs calling out "What about me?".. along the lines of (only) having properties in their fund and now tenants can't pay the rent.. Suddenly retirement income has evaporated.

What do we have here? A lack of a diversified income stream comes back to bite; all's great until it's not.. Poor risk management. (And even worse if there was LRB borrowing)

 

[Bill M]

Maybe a tip of the iceberg moment unfolding?

This is a big, BIG problem, red flag for sure. If I had an account with any super fund that thinks they can restrict my cash withdrawals (above and beyond government restrictions) during my retirement then I would flick them in a minutes flash. This is so wrong on all levels. Sending the WRONG message in my opinion. This reset will test them all.

 

[InsvestoBoy]

"The trustee may suspend or restrict applications, switches, redemptions and withdrawal requests for all or a particular investment option at its absolute discretion. In such circumstances, transactions may not be processed or may be processed with significant delay," the updated clause on page 62 of the 215 fund's product disclosure document said.

I guess it must be because otherwise they wouldn't do it, but I thought Super funds had to legally provide ability to switch to cash?

 

[sptrawler]

There's an article about some SMSFs calling out "What about me?".. along the lines of (only) having properties in their fund and now tenants can't pay the rent.. Suddenly retirement income has evaporated.

What do we have here? A lack of a diversified income stream comes back to bite; all's great until it's not.. Poor risk management. (And even worse if there was LRB borrowing)

When we discussed the LRB borrowing by SMSF on this thread, when it first was introduced to pump the property bubble in about 2010, we said it was a recipe for disaster.

 

[sptrawler]

This is a big, BIG problem, red flag for sure. If I had an account with any super fund that thinks they can restrict my cash withdrawals (above and beyond government restrictions) during my retirement then I would flick them in a minutes flash. This is so wrong on all levels. Sending the WRONG message in my opinion. This reset will test them all.

Absolutely Bill and as we have always been saying, no one looks after your money better than you, they don't have any skin in the game.

 

[Dona Ferentes]

When we discussed the LRB borrowing by SMSF on this thread, when it first was introduced to pump the property bubble in about 2010, we said it was a recipe for disaster.

Article is here:
https://www.afr.com/wealth/superann...s-call-on-government-for-help-20200407-p54hue

 

[sptrawler]

Article is here:
https://www.afr.com/wealth/superann...s-call-on-government-for-help-20200407-p54hue

It was diabolical to let SMSF's borrow to buy rental property, let alone encourage it, this was always going to happen IMO.
If not the virus, anything that adversely effected rent, when it would be such a big component of the SMSF account. This will be more widespread, since the $1.6m cap was introduced IMO.
Those who are caught, really deserve to be caught IMO, blind Freddy could see the problems.
Here is an excerpt from an article, highlighting the problem a while back:

That’s interesting, because it was the ATO that allowed banks to have recourse to personal assets in regards to SMSF loans, back in about 2012. Prior to that, they were essentially non-recourse lending arrangements – the banks were only able to access the asset itself (not assets owned by the SMSF trustees in their personal names).

The ATO wrote the rules. The first, second and third iterations of them.

Biggest threat … and easiest solution

There is a genuine concern that newby SMSF trustees are being stripped of their super savings by property developers. I’ve said countless times in the past that one-stop property development shops are the single biggest threat to new, or wannabe, SMSF trustees.

https://brucebrammallfinancial.com.au/blog/what-will-happen-with-lrbas/

 

[Dona Ferentes]

It was diabolical to let SMSF's borrow to buy rental property, let alone encourage it, this was always going to happen IMO.

The issue is bigger than that (nasty as LRB was, is and increasingly will be)

A good Risk Profile and attentive Investment Strategy addressing liquidity, cash flow, ability to meet uncertain future events is essential. Sadly, it can be glibly 'flick-passed' by finding a compliant auditor and advisor (if so utilised). Chickens are coming home to roost.

Diversification is the only free lunch. And mark-to-market may come to be your long-term friend.

 

[sptrawler]

The issue is bigger than that (nasty as LRB was, is and increasingly will be)

A good Risk Profile and attentive Investment Strategy addressing liquidity, cash flow, ability to meet uncertain future events is essential. Sadly, it can be glibly 'flick-passed' by finding a compliant auditor and advisor (if so utilised). Chickens are coming home to roost.

Diversification is the only free lunch. And mark-to-market may be your long-term friend.

I run the SMSF, as if it is the only income that I will ever get, that is why it is conservative.
I know there is a pension there if I fail, but that is the issue for me, I have been poor and promised myself I wont go back there.
So high flying isn't for me and I will never be rich, but I will never be poor again either.
Here is an article from those that were selling it.
https://smsfcoach.com.au/tag/smsf-borrowing/

 

[Dona Ferentes]

+

Moi, aussi

 

[sptrawler]

IMO the super funds that can't meet their cash obligations, are no better than the Banks and financial institutions that were done for charging when no service was provided, the trustee's are there to ensure that the worst case scenario is covered.
They aren't there just to pull a cosy pay cheque, for rubber stamping and outsourcing all their responsibilities, then when it falls in a hole say well tough $hit we aren't accountable.
Just my opinion.

 

[Humid]

I imagine certain section of the work force may draw on their super more than others
Like hospitality more so than construction but then it depends on how deep this $hitstorm goes[/QUOTE

Here is another reason I started my own SMSF, it is o.k for political parties to try and force you into retail or industry funds, but that doesn't make it right. This article shows, it isn't really your money, you just think it is IMO. Well worth reading the whole article IMO.
Maybe a look into the infra structure exposure and why the high exposure, is warranted? Maybe a tip of the iceberg moment unfolding?

https://www.smh.com.au/business/ban...suspend-cash-withdrawals-20200407-p54hqc.html
From the article:
The $44 billion superannuation fund representing the hospitality industry has updated its product disclosure statement to highlight its "absolute discretion" to "suspend or restrict" applications for cash withdrawals, despite defending its ability to pay out the government's emergency early access scheme.

Hostplus has altered a clause in its PDS that will be relevant to a large portion of its members without any warning. Previously, the clause had told members they can switch between investment options and it would be processed within two days. The amended clause reveals the fund has total power to halt payouts at its discretion.

"The trustee may suspend or restrict applications, switches, redemptions and withdrawal requests for all or a particular investment option at its absolute discretion. In such circumstances, transactions may not be processed or may be processed with significant delay," the updated clause on page 62 of the 215 fund's product disclosure document said.

"The trustee may also decide to process a transaction request for a particular type of benefit from a suspended, restricted or closed option on a case by case basis. Any decision about whether to process transactions from such an option will be made in the best interests of investors as a whole.
"All impacted transaction requests will be processed using the effective unit price applicable on the date the suspension is lifted, or the date special approval is granted if earlier."

Hostplus says the trust deed – a legal document setting out the terms and conditions for managing a trust – had always enabled the fund to suspend redemptions.



Hostplus is the industry superannuation fund for employees in hospitality, tourism, recreation and sport. Join now and get super informed.

From memory it wasn’t hard to change funds
Might be a good time to

 

[sptrawler]

From memory it wasn’t hard to change funds
Might be a good time to

Who would you recommend?

 

[PZ99]

IMO the super funds that can't meet their cash obligations, are no better than the Banks and financial institutions that were done for charging when no service was provided, the trustee's are there to ensure that the worst case scenario is covered.
They aren't there just to pull a cosy pay cheque, for rubber stamping and outsourcing all their responsibilities, then when it falls in a hole say well tough $hit we aren't accountable.
Just my opinion.

It seems to me the fund in question can meet its cash obligations - but blatantly refuses to pay.

They should be prosecuted, have members' money transferred elsewhere, and then deregistered.

 

[Dona Ferentes]

...
it wasn’t hard to change funds ...
Might be a good time to

in this day and age, with high volatility, days of 10%+ swings in the share markets, somewhat non functioning bond and credit markets, I'd be wary of switching. Get out on a bad day, and miss the up day (can U guarantee same day processing? <answer is NO, by the way>) and there could easily be a large dollar deficit in the investment balance.

 

[sptrawler]

It seems to me the fund in question can meet its cash obligations - but blatantly refuses to pay.

They should be prosecuted, have members' money transferred elsewhere, and then deregistered.

It will be interesting to see how this plays out, most people would have thought this hickup with their jobs will last a month or two then it is all back to normal, when it keeps going on people are going to start demanding answers of their super funds.
There is no point having $250k in the super and having a mortagee sale on your house IMO.
I'm all for super, but it is important people own their home first IMO.

 

[sptrawler]

in this day and age, with high volatility, days of 10%+ swings in the share markets, somewhat non functioning bond and credit markets, I'd be wary of switching. Get out on a bad day, and miss the up day (can U guarantee same day processing? <answer is NO, by the way>) and there could easily be a large dollar deficit in the investment balance.

Most of the funds don't report daily, from my understanding, monthly at best.

 

[Humid]

I imagine certain section of the work force may draw on their super more than others
Like hospitality more so than construction but then it depends on how deep this $hitstorm goes

As I said Friday

 

[sptrawler]

As I said Friday

Congratulations one right.