Superannuation, the ultimate government cash cow?

[qldfrog]

Always going to be a risk with funds when the majority of their membership base is exposed to the one industry. Not only will many of their members be looking to access their super with the recent measures, but future contributions are drying up quick smart which is cashflow and impacts future projections.

I work for an industry fund, our unlisted assets are being revalued and will be interesting to see the quarterly numbers when produced. Prudent funds should be stress testing their AUM for falls of between 30-50%.

How assets are classed is another question all together...still some out there who deem property to be more conservative than growth..

Wouldn't be surprised to see mergers sped along once the pandemic is over (enough are getting a tap on the shoulder from ASIC already).

I work for an industry fund, our unlisted assets are being revalued and will be interesting to see the quarterly numbers when produced.

We are a finances oriented site, and should care about our member finances well being
With this specific value point in mind,we looked at my wife's fund and trigerred on monday a switch to cash for a portion of units which in our opinion might not have reflected a lack of liquidity and fall in value...
I invite non SMSF people to do the.same before getting hit and while they can

 

[qldfrog]

We are a finances oriented site, and should care about our member finances well being
With this specific value point in mind,we looked at my wife's fund and trigerred on monday a switch to cash for a portion of units which in our opinion might not have reflected a lack of liquidity and fall in value...
I invite non SMSF people to do the.same before getting hit and while they can

If you go in the detail, you will soon find very vague quotes about the composition of the Balanced..in our case option
A mix of bonds, properties,etc etc
Property as in REIT or next door city office..no details, bonds as junk corporate bonds or gov bonds..no details
I am afraid people are going to wake up to a lot of surprises in this area

 

[fiftyeight]

With so many people registering to withdraw their super, will large funds be selling now to free up cash or are they required hold off until actually instructed there is a withdrawal from the ATO?

 

[qldfrog]

A bit late now, if I do say so myself, considering Hostplus now have the power to suspend or restrict withdrawals. I don't need to withdraw my super and my asset allocation is in an index option, not a premixed option with unlisted assets.

The fact they can does not mean they will, what about applying for a fund transfer tomorrow
Either via fees or underperformance, you will end up paying for their problem, and you noted they can switch your funds..
GTFO as soon as you can

 

[Junior]

The access to $10k has always been there for financial difficulty claims as far as I know, mainly because my lost son, has claimed it before.

The difference with this measure is there will be a massive number of individuals who are eligible, far far more than the standard Hardship provisions which are difficult to satisfy. They are saying at this stage you don't even need to submit evidence that you are eligible, you just have to 'self-certify'. It's this fact, compounded by a sudden fall in prices, further compounded by these funds holding illiquid assets, which will need to be written down. And, further compounded for those industry funds with low average balances, with many members who will take advantage of the $20k w/d.

I hope these arrogant industry funds will quit with their 'compare the pair' marketing campaign. We are seeing the real truth come out now. They took excessive risk with their members money, and at the same time used member funds to pay for huge marketing campaigns bragging about their performance.

 

[Humid]

Arrogant is what I’d call the banks and AMP version of super

https://ministers.treasury.gov.au/m...6/transcripts/interview-david-speers-sky-news

 

[sptrawler]

The difference with this measure is there will be a massive number of individuals who are eligible, far far more than the standard Hardship provisions which are difficult to satisfy. They are saying at this stage you don't even need to submit evidence that you are eligible, you just have to 'self-certify'. It's this fact, compounded by a sudden fall in prices, further compounded by these funds holding illiquid assets, which will need to be written down. And, further compounded for those industry funds with low average balances, with many members who will take advantage of the $20k w/d.

I hope these arrogant industry funds will quit with their 'compare the pair' marketing campaign. We are seeing the real truth come out now. They took excessive risk with their members money, and at the same time used member funds to pay for huge marketing campaigns bragging about their performance.

To me the issue is, the super funds have never before been placed in this position, where a large number of members require a relatively small amount of money.
It is usually the other way around, with a very small number of retirees wanting a very small amount and a very large number of younger people are putting more money in every week.
Yet when called upon they are suggesting they may struggle to find the cash, well then isn't that a fees for no service situation? They are paid management fees to ensure there is enough liquidity, after all a 20% cash withdrawal isn't huge and it isn't all the members that will be accessing it.
Even the most volatile growth product offering, from the super fund, would be expected to have 20% cash exposure surely.
What it has highlighted IMO, is that the industry actually in all reality probably doesn't have a clue as to its solvency and as has been proven many times in history they are all winners in a rising market.
The next 12 months will be very interesting IMO, as the super funds have to report actual performance and some may have very interesting results.
Also I bet the regulator, is watching very carefully.

 

[Humid]

To me the issue is, the super funds have never before been placed in this position, where a large number of members require a relatively small amount of money.
It is usually the other way around, with a very small number of retirees wanting a very small amount and a very large number of younger people are putting more money in every week.
Yet when called upon they are suggesting they may struggle to find the cash, well then isn't that a fees for no service situation? They are paid management fees to ensure there is enough liquidity, after all a 20% cash withdrawal isn't huge and it isn't all the members that will be accessing it.
Even the most volatile growth product offering, from the super fund, would be expected to have 20% cash exposure surely.
What it has highlighted IMO, is that the industry actually in all reality probably doesn't have a clue as to its solvency and as has been proven many times in history they are all winners in a rising market.
The next 12 months will be very interesting IMO, as the super funds have to report actual performance and some may have very interesting results.
Also I bet the regulator, is watching very carefully.

Yeah placed in that position by a liberal government that hates union backed funds
Still licking their wounds from the RC

 

[sptrawler]

Yeah placed in that position by a liberal government that hates union backed funds
Still licking their wounds from the RC

Yeah I know what you mean, after the demonising SMSF's copped before the last election, talking about licking wounds nothing wrong with a bit of Karma.

 

[Humid]

The dumb libs with their royal commission sent more people to industry funds lol

 

[PZ99]

The fact they can does not mean they will, what about applying for a fund transfer tomorrow
Either via fees or underperformance, you will end up paying for their problem, and you noted they can switch your funds..
GTFO as soon as you can

I'm with you on the GTFO. Over the next few decades Govts will be looking everywhere for money to pay for this near universal handout.

My long term view is when you reach your preservation age a future Govt will restrict your withdrawals to a certain % every year and that will the annuity that partially or totally replaces your age pension.

No more retiring at 60 / 65, buying a boat with your super, and then going on the pension

 

[sptrawler]

My long term view is when you reach your preservation age a future Govt will restrict your withdrawals to a certain % every year and that will the annuity that partially or totally replaces your age pension.

No more retiring at 60 / 65, buying a boat with your super, and then going on the pension

I think that is a certainty.

 

[sptrawler]

The dumb libs with their royal commission sent more people to industry funds lol

Agree with that, now people are $hiting themselves over the issue, my MIL is cashing out her industry fund.
I think this issue is well overdue, to get an airing, it will be better all round for everyone.
Way too many people wanting to look after your money, with bugger all accountability IMO.

 

[Humid]

I'm with you on the GTFO. Over the next few decades Govts will be looking everywhere for money to pay for this near universal handout.

My long term view is when you reach your preservation age a future Govt will restrict your withdrawals to a certain % every year and that will the annuity that partially or totally replaces your age pension.

No more retiring at 60 / 65, buying a boat with your super, and then going on the pension

Unless they withdraw it now for the emergency
I wouldn't imagine people looking to cash in now would have too much in super anyway from the hospitality industry

 

[sptrawler]

Agree with that, now people are $hiting themselves over the issue, my MIL is cashing out her industry fund.
I think this issue is well overdue, to get an airing, it will be better all round for everyone.
Way too many people wanting to look after your money, with bugger all accountability IMO.

Here is an interesting article explaining the problem.
But this is the issue we have brought up several times over the years.
https://www.macrobusiness.com.au/2020/04/labor-admits-superannuation-is-a-ponzi-scheme/
From the article:
Labor’s shadow Treasurer, Jim Chalmers, has penned a letter calling on the Reserve Bank of Australia (RBA) to provide a liquidity backstop for cash-strapped superannuation funds so that they can meet member’s redemption requests. Chalmers’ request has arisen following the Morrison Government’s announcement that it would permit Australians to access up to $20,000 in savings from their superannuation so that they can weather the coronavirus storm:

“Labor is committed to continuing to work with the government so that this scheme is a success, but we fear that the government’s decision to drastically expand the conditions for early release of superannuation could cause liquidity issues that threaten the integrity of our super system for all Australians if they are not addressed”… “While some self-managed super funds may have large cash holdings, many other funds do not have large cash holdings”… As millions of Australians lose their job or a portion of their income, super funds would be receiving less incoming cash and this could leave them having to sell equity holdings to pay for the scheme, they warn, saying a “wait and see approach” was not appropriate as funds need to act immediately.

Labor has tacitly admitted that Australia’s superannuation system is a giant Ponzi scheme whose “integrity” is reliant on ever growing fund inflows via the mandated 9.5% superannuation guarantee. Unless the amount of money coming in from new investors is enough to cover the redemptions of previous investors, Australia’s superannuation system will implode. This is because the level of one’s retirement income is dependent not just on the performance of the superannuation fund’s underlying investments, but also on whether they withdraw their savings while the “bubble” is still inflating with net inflows of new money. These ponzi dynamics help to explain why Labor so strongly supports lifting the superannuation guarantee to 12%, since this will ensure that net superannuation inflows continue to rise even as more baby boomers retire and withdraw their savings. Without the increase in the superannuation guarantee to 12%, fund outflows could exceed inflows, pulling money out of the system, deflating the bubble, and lowering everyone’s retirement nest eggs.

 

[Humid]

Here is an interesting article explaining the problem.
But this is the issue we have brought up several times over the years.
https://www.macrobusiness.com.au/2020/04/labor-admits-superannuation-is-a-ponzi-scheme/
From the article:
Labor’s shadow Treasurer, Jim Chalmers, has penned a letter calling on the Reserve Bank of Australia (RBA) to provide a liquidity backstop for cash-strapped superannuation funds so that they can meet member’s redemption requests. Chalmers’ request has arisen following the Morrison Government’s announcement that it would permit Australians to access up to $20,000 in savings from their superannuation so that they can weather the coronavirus storm:

“Labor is committed to continuing to work with the government so that this scheme is a success, but we fear that the government’s decision to drastically expand the conditions for early release of superannuation could cause liquidity issues that threaten the integrity of our super system for all Australians if they are not addressed”… “While some self-managed super funds may have large cash holdings, many other funds do not have large cash holdings”… As millions of Australians lose their job or a portion of their income, super funds would be receiving less incoming cash and this could leave them having to sell equity holdings to pay for the scheme, they warn, saying a “wait and see approach” was not appropriate as funds need to act immediately.

Labor has tacitly admitted that Australia’s superannuation system is a giant Ponzi scheme whose “integrity” is reliant on ever growing fund inflows via the mandated 9.5% superannuation guarantee. Unless the amount of money coming in from new investors is enough to cover the redemptions of previous investors, Australia’s superannuation system will implode. This is because the level of one’s retirement income is dependent not just on the performance of the superannuation fund’s underlying investments, but also on whether they withdraw their savings while the “bubble” is still inflating with net inflows of new money. These ponzi dynamics help to explain why Labor so strongly supports lifting the superannuation guarantee to 12%, since this will ensure that net superannuation inflows continue to rise even as more baby boomers retire and withdraw their savings. Without the increase in the superannuation guarantee to 12%, fund outflows could exceed inflows, pulling money out of the system, deflating the bubble, and lowering everyone’s retirement nest eggs.

You didn't copy and paste the apologies for the fake news which was getting a run here?

 

[sptrawler]

You didn't copy and paste the apologies for the fake news which was getting a run here?

Yes that was at the end of the article and was about an earlier article, not about the content of the posted article, they were actually naming a specific fund for with holding payouts apparently.
It had no bearing on what was posted.

 

[Humid]

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.

So did you

 

[sptrawler]

So did you

Actually I didn't, I posted an article written by a journalist and made the comment that they can actually do with your money, what they see fit.
What Macro business had to apologies about, was it apparently stated that Hostplus had changed their PDS, which is completely different from what I stated.
Macro business didn't have to retract any of the statement about super being a ponzi scheme, which is the thrust of the issue, we are discussing.

 

[Junior]

Arrogant is what I’d call the banks and AMP version of super

https://ministers.treasury.gov.au/m...6/transcripts/interview-david-speers-sky-news

Arrogance all round. The banks and retail super funds copped their whack last year. I'm not defending AMP.

What really bothered me however, were the industry funds sailing through with no scrutiny whatsoever. HOSTPLUS, amongst a few others, were whacking the majority of their members in a High Growth, illiquid portfolio, labelling it as 'Balanced' and then spending member funds telling the world how great their returns are, and how you'll end up with more money in retirement if you choose them. Comparing their twisted version of 'Balanced', with a retail fund version of Balanced, two very different portfolios.

Many financial advisers tried to raise some of these issues last year, and Hayne ignored them.