Warning Signs From Aussie Super Funds – Time to Act?
News
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Posted 31/07/2023
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We were sent an eye opening press release last week and feel compelled to share it. Unsurprisingly not picked up by the mainstream media, it paints a concerning picture around the accessibility and liquidity of your super in managed funds as opposed to full control in your own Self Managed Super Fund.
Are Australian Super Funds going broke?
by Mary-Jane Liddicoat
In contravention of legislation, several major Australian superannuation funds, such as HostPlus, Russell Investments, Aware, HESTA and others, appear to be deploying a range of strategies to delay releasing the superannuation funds of Australians.
According to the Superannuation Industry (Supervision) Regulations 1994 stating under SIS r. 6.34A, Australian Prudential Regulator Authority (APRA) licensed Australian super funds must complete a standard rollover as soon as practicable, but not later than three business days after receiving the request containing all mandated information.
In reality, some are taking weeks and even months.
As featured in The Australian’s Business Review on 20 June 2023, Freedom Financial Solutions FFS, a small accountancy firm whose Self-Managed Super Fund (SMSF) division grew 2000 per cent since September 2022, has noticed a marked change in the responsiveness of major industry/retail super funds.
"We've have had an unprecedented rush of people wanting to set up SMSFs since mid-2022, when people started to notice the growing global financial uncertainty. Especially with the collapse in early 2023 of several US banks, people became even more worried they might lose their retirement savings. Some of them remember their parents losing everything in the 2008 GFC.
“Our clients have decided to learn how to manage their own superannuation and they've asked us to help them set up an SMSF; we provide the technical expertise," says Freedom FFS CEO, Catherine Smith.
"SMSFs have been around since 1993, and we've helped people set up, and manage them successfully for more than 20 years. Over all these years, we've never experienced the outgoing industry/retail funds be so uncooperative," Catherine laments. "It's been really tough on our small business. My team is on the phone all day, every day, chasing our clients' rollovers."
While not suited to everyone, a growing number of Australians are setting up SMSFs to take direct control over their retirement finances. One of the main benefits people see is the wider range of investment choices, such as gold and silver.
Susan, who asked Freedom FFS a few months ago to help her set up an SMSF, said “I used to think my retirement funds were in safe hands with the big retail funds. But over the last few years, I started to doubt their ability to manage my money safely and effectively.”
“It's been a nightmare to get HostPlus to transfer my money into my SMSF. My accountant sent in all the paperwork and requested the rollover using a ‘superstream’ online system, then HostPlus asked for the same paperwork three times! They kept saying they hadn’t received it even though Australia Post recorded that it had been delivered.”
Susan's experience is not unique. Adrian's first requested his funds be rolled out of Russell Investments in December 2022, and in the following six months, both he and his accountant followed up by phone more than ten times and requested the transfer three different ways: via the online superstream system, in handwritten paper form, and from within the ATO portal.
Adrian's money has still not landed in his SMSF. Over this six-month period, Russell Investment repeated a revolving list of the same factually inaccurate excuses as to why they would not release Adrian's funds. He is now filing a formal complaint with the Australian Financial Complaints Authority (AFCA) and raising this issue with his Federal representatives and the Economics Legislation Committee in Australian Parliament House.
Most Australians have been through turbulent financial times over the last few years and the superannuation industry is not immune from market pressures across the broader sector. This has resulted in an increasing number of APRA regulated superannuation funds being forced to merge in 2023.
The establishment of new SMSF funds has increased consistently every year since early 2020, the ATO’s June 2022 data shows 27,713 new establishments for that financial year alone. The same period also shows a consistent year-on-year slowdown in SMSF wind-ups.
There are now more than 1.1 million SMSF members spread across more than 603,000 funds holding a collective value of $867 billion. Of the 163 APRA funds still standing in April 2023, some 32 per cent of them - 53 funds - were considered to be performing poorly, leaving their members trapped in funds with poor returns and/or high fees.
Perhaps these everyday Aussies moving their super from the big funds to their SMSFs are on to something? Are the delays being caused because the APRA super funds don’t have the money to transfer?
Are Australian superfunds about to go broke? And if they do, what does that mean for your retirement?
“Our clients have decided simply that they’re not willing to risk it. Often for the very first time they’re taking direct control of their finances. They are moving them quite literally into their own hands by investing in assets that they can physically hold: gold and silver” explains Catherine.
“It’s a huge step for most everyday Aussies. So that’s our focus at Freedom FFS: to help Australians better protect their future.”
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Do you have a complaint about the time your APRA super fund took to action your request, or similar? Lodge it here:
Australian Financial Complaints Authority https://www.afca.org.au/
Sen Jess Walsh, Chair, Chair of Economics Legislation Committee, Australian Parliament House [email protected] Parliament office (02) 6277 3744
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An interesting and concerning read if you are still in these funds, particularly given we are not in the middle of any overt market crisis, so to speak. Liquidity during market turmoil can be a whole other kettle of fish (metaphorically with the kettle on the stove and you the poor fish). You may recall our earlier articles about the Peril of Passive ETF’s and Market Breadth (and last week’s update on this perverse concentration) in terms of your exposure to sharemarkets in managed super funds where you have no control. Then more broadly we talked in terms of the government agenda around nationalising them into housing and infrastructure projects. This is all before the proverbial hits the fan. The above article is a notice that now may well be the time to start taking control before you hit the fan…