Those superannuation funds facing liquidity issues because of thousands of COVID-19 sackings and stand-downs in the travel, hospitality and retail sectors should have thought more about diversifying their memberships, according to the Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator Jane Hume.
Addressing a forum yesterday, Hume described the lack of membership diversification as a structural weakness.
“I’ve spoken many times about the justifiable pride we all feel in the Australian superannuation system – its operations, its opportunities and its origins. But what we are seeing now is a structural weakness in our super system that’s been long hiding in plain sight,” she said. “Failure to diversify fund membership can be as dangerous as failure to diversify investments.”
Hume said this was something for trustees to think about as the industry might be on the cusp of a round of mergers.
“It has always seemed logical in mergers for trustees to seek opportunities to merge with like brethren. But we need to ask ourselves whether such proposals which essentially double down on the same set of risks are wise,” she said. “Are such mergers – motivated more by super’s industrial relations legacy than by modern-day concepts of prudent risk management – to the benefit of their members?”
“I welcome the strong support for the government’s early release initiative from funds like SunSuper, Australian Super and MLC. But of course, these are the funds that quickly realised they are capable of responding in a timely manner – because their membership reflects a broad cross-section of the economy, not a single industry,” she said.
“Those funds whose members are congregated in sectors hardest hit by the virus, particularly smaller funds, unless they have risk-managed their investments for a crisis, may find this period very uncomfortable,” Hume said. “However, I want to say today, that discomfort is no excuse to not release members’ money – their own money – in a time of need.”