THE Financial Services Council (FSC) has announced that it supports the package of temporary measures "which will greatly assist Australians in financial hardship during the current national emergency".

The measures include temporary early release of a limited amount of superannuation for individuals in financial stress; temporary reduction in minimum superannuation drawdown rates for retirees; temporary reduction in social security deeming rates.

FSC CEO Sally Loane said the FSC had always supported the early release of superannuation in cases of genuine hardship, and recognises that the existing early release framework was not designed to address the needs of individuals during a national emergency such as the current pandemic. 

"We understand that the government's temporary measures for early access to $10,000 tax-free this financial year and another $10,000 the following financial year will apply only to those in severe economic hardship, such as people who have lost their jobs as a result of the coronavirus crisis,” Ms Loane said.

"The FSC will continue to work closely with our industry, the agencies and government to understand the potential impact of the package and ensure these measures are implemented in a way that manages liquidity and systemic risks.

"Accessing superannuation should not be the default response to providing income support for Australians in need over the short term, so we are pleased to see that this is a temporary measure as part of a broader income support package," Ms Loane said.

“Also, the decision to support retirees at this time by temporarily reducing minimum drawdowns and halving social security deeming rates is a welcome acknowledgement that it is inappropriate to force individuals to crystallise investment losses in a volatile market.

“We urge the government to continue working with the superannuation sector as we focus on safeguarding the retirement savings of Australians through this period of uncertainty, and look toward the industry’s role in investing to support the economic recovery effort,” Ms Loane said.

About the Financial Services Council

The Financial Services Council (FSC) has over 100 members representing Australia's retail and wholesale funds management businesses, superannuation funds, life insurers, financial advisory networks and licensed trustee companies. The industry is responsible for investing almost $3 trillion on behalf of more than 14.8 million Australians. The pool of funds under management is larger than Australia’s GDP and the capitalisation of the Australian Securities Exchange and is the fourth largest pool of managed funds in the world.

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“IN TIMES of financial crisis such as now, retirees need more flexibility in the minimum amount there are required to draw from their superannuation,  Association of Independent Retirees president, Wayne Strandquist said this week.

“Retirees living off their superannuation usually have some investments in shares and they have experienced a dramatic fall in their account balances due to the current share market collapse," he said.

Legislation requires retirees to draw a minimum percentage from their superannuation pension account, usually drawn monthly. Being forced to withdraw from superannuation when the value of the account is substantially diminished will have long term impacts on how long superannuation lasts in retirement.

Currently, retirees do not have the option to preserve their account balance by stopping the minimum superannuation drawdown amount.
 
“The Association of Independent Retirees seeks government intervention to give immediate relief to the current age-based drawdown percentages for account-based pension income streams and allow greater flexibility for retirees to vary the amount they can draw from their superannuation account," Mr Strandquist said.
 
“The Association has previously called on the government for greater flexibility by broadening of the age ranges and a lowering of the minimum drawdown percentages, but with the current investment market crisis, the Association seeks immediate options for retirees to lower or cease withdrawals from their superannuation account and resume their usual drawdowns when the investment markets improve."

www.independentretirees.com.au

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INDUSTRY Super Australia (ISA) has acknowledged the announcement made by the Federal Government today and is ready to work through the all important detail that will enable people suffering hardship access to some of their super in an efficient way that doesn’t undermine our national savings system.

"As we have been indicating publicly, this is an issue that must be handled very carefully in order to prevent the compounding of liquidity pressures that may be faced by superannuation funds in the current market conditions, and as they support anxious members," Industry Super Australia chief executive officer Bernie Dean.

"Although industry superannuation funds were not consulted in the formulation of this proposal, we stand ready to engage with government and the ATO to make it work.

"Assisting those in financial hardship will come down to how well the ATO works with the funds, given each superannuation fund will have to manually issue the money," he said.

"Effective co-ordination from the government and the ATO will be vital to ensure the scheme works efficiently and does not frustrate people further, remembering that the workforce of many funds are working remotely just like other affected businesses. 

"Aside from getting the details right, we need a commitment from the government to transparently report the scheme’s applications and any issues encountered. The scheme should also be reviewed as it is rolled out to ensure it will not hamper funds’ capacity to support the macro economic recovery."

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THE Australian Small Business and Family Enterprise Ombudsman Kate Carnell has praised the banks, which have on March 20 announced a significant relief package for COVID-19 impacted small businesses.

The Australian Banking Association said banks would defer loan repayments for small businesses affected by COVID-19 for six months

“This is a welcome initiative that will help many struggling small businesses keep their doors open during these extraordinarily challenging times,” Ms Carnell said.

“I would encourage all small business owners who are experiencing financial difficulties, to call their banks now, to make the necessary arrangements.

“Banks are promising to fast-track the approval process to ensure small businesses get the support they need as soon as possible.

The assistance package will apply to more than $100 billion of existing small business loans and put up to $8 billion back into the hands of small businesses.

“As we navigate this unprecedented crisis, it’s encouraging to see our banks are taking this proactive approach and leading by example,” Ms Carnell said.

“Our small business sector is the engine room of the economy and it urgently needs support.

“In the meantime, my office will continue to advocate for additional measures to help small and family businesses stay afloat in this difficult period.”

www.asbfeo.gov.au

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