ASFA members call for redemption relief

The Association of Superannuation Funds of Australia (ASFA) has asked the Australian Prudential Regulatory Authority (APRA) for temporary relief from the requirement to pay out member benefits within 30 days.

The current market environment has seen super funds face more difficult circumstances in which to sell assets to pay cash benefits to members who wish to withdraw large lump sums.

ASFA members are now asking for relief from the 30-day requirement to avoid the fire sales that may be required to fund requests. Under normal circumstances, the Superannuation Industry (Supervision) Act 1993 requires funds to make benefit payments within 30 days once all the relevant information is received.

While equities would be the usual go-to point for super funds, current prices aren’t attractive for sellers. And while the sale of illiquid assets is another possibility, the current crisis has rid the market of buyers.

ASFA chief executive Pauline Vamos said the industry body is seeking relief “on behalf of our members, recognising we are in an incredibly volatile market”.

“We’re in unique circumstances, so we’re looking at what [should we] be asking of our regulators in order that we can all operate in the best interests of members in this environment.”

Vamos said while there are always “individual situations” in which super funds apply for relief from the 30-day requirement, now “everybody’s under the pump, including APRA, so we’re looking at ways that we can provide the general flexibility to the industry that is normally afforded individually”.

Under the relief, individual funds could exercise discretion regarding the timing of payments and then notify APRA, Vamos said.

Vamos said it was hoped the situation could be reassessed on a month-by-month basis, but reinforced that the issue is around the flexibility regarding the timing of payments, as opposed to the non-payment of benefits.

ASFA is meeting with APRA on Friday to discuss the matter.

ASFA is also discussing the impacts of the current financial crisis with the Australian Securities and Investments Commission (ASIC) in regards to more flexibility in providing advice to members. ASFA has asked ASIC for a no action decision “so that we can actually advise during this time without being caught by implied advice”.

This would allow funds to ask members if they understand the consequences of transferring or cashing out their super benefits in the current environment.

Vamos said super funds do not wish to make recommendations, but rather provide tax advice and information about the benefits of staying in super for the long term. Vamos said there will be a meeting between ASIC, APRA and the Government today to consider the matter.

Vamos said the regulators, government and AFSA are monitoring the situation and that any action is being taken “tentatively and slowly” to avoid rash decisions.