Regulators have a heightened awareness of the possibility of a ‘run’ on a superannuation fund, according to Senator Jane Hume.
In an interview with Stockspot chief executive and founder, Chris Brycki, Hume, who was minister for financial services, superannuation and the digital economy, said a run had become a greater possibility for superannuation funds.
A run was defined as a growing number of requests for redemptions from investors, often as a result of underperformance.
Asked if she saw this being a heightened risk following Your Future, Your Super changes, Hume said: “I think that’s something the regulator now has increased heightened awareness of and they will change their oversight practices to accommodate that because it is really important.
“What it means is those ‘insiders’ or highly-engaged investors will take advantage at the expense of those who aren’t engaged such as those mum and dad investors. People who are in a default Balanced fund might end up paying for the highly-engaged decision for somebody who’s just in a single asset class and that’s not good. You can’t use a default fund as a cash deposit for those sort of investment decisions.
“There is a new awareness of that and the regulator is all over it.”
Meanwhile, she said trustees should not be using member savings to pay penalties for trustee misconduct or capitalise themselves.
“This bothers me a great deal,” she said. “Trustees have plenty of money to pay for their own bad behaviour, they should not be taking retirement savings out of members who have entrusted them to manage their money in order to pay for it. That is something we will keep an eye on.
“It goes against every direction of the reforms we have been taking superannuation over the last three years, trustees need to held accountable for their own misconduct.”