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Early release to widen gender gap for COVID applicants
The gender super gap is set to get even bigger for female workers who accessed the Government’s COVID early release super scheme, according to a joint analysis of profit-to-member fund data released today by AIST and Women in Super (WIS).
Speaking at this week’s annual Women’s Super Summit, AIST Head of Advocacy and WIS Deputy Chair Melissa Birks said the COVID early release scheme had compounded the structural inequities in our super system for females who had accessed the scheme.
“Women who accessed their super through the scheme – often because they had no other place to turn for financial support - are now even further behind the eight ball when it comes to retirement savings,” Ms Birks said.
“In normal times, the gender super gap starts to become more evident when many women take a career break to care for their first child in their 30s. Some of these women will now be saving for their retirement pretty much from scratch when they return to work.”
Cate Wood, the National Chair of Women in Super, said the early release scheme, whilst providing financial relief for those facing genuine hardship during Covid-19, would exacerbate the existing challenges facing women.
“We are seeing increasing numbers of older women facing poverty in retirement. We cannot stand by and watch more generations face the same plight. It is important that we act now to ensure that women are at the centre of any post-COVID super or other economic recovery policy measures.”
The analysis of more than 750,000 super withdrawals during the first tranche of the COVID scheme shows young women have been most impacted by the scheme.
Female applicants aged 25-34 had on average a starting balance before COVID of $19,906, which is 21% less than the average male balance of $25,200 across this age cohort. After withdrawing their super, this gap widened to 46%.
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AIST calls for measures to plug COVID super gap
AIST is calling on the Government to commit to addressing the COVID super gap targeted measures, including a one-off super contribution of up to $5000 for low income earners who were eligible to access the COVID early release scheme.
In our pre-October Federal Budget submission we note that young Australians will bear the brunt of an estimated $100 billion COVID super gap at retirement.
In a write up this week in the Age/SMH and the AFR, AIST CEO Eva Scheerlinck said the burden of this $100 billion gap– a finding from AIST-commissioned Mercer research - would be borne by those who could least afford it - women, low paid workers and those who have insecure jobs.
“The early release scheme unfortunately forced many people to choose between poverty now or poverty in retirement,” she said. “These vulnerable Australians are unlikely to recover from this without targeted policy intervention.”
AIST’s own analysis of aggregated fund data has revealed that prior to making a withdrawal, members that made an early release application had on average 20% less than their peers that didn’t make an early release application, with younger Australians disproportionately represented among scheme applicants.
One in five Australians aged between 25 and 34 age withdrew super. Under 35s collectively took out 40% of the total amount withdrawn. Applicants in this age group on average withdrew at least a third of their total super balance in the first tranche and it is estimated up to that another 15% of members in this cohort.
AIST’s submission recommends:
In addition, the legislated increase in the superannuation guarantee to 12% will provide crucial relief from the full brunt of the super gap for those who can return to work.
Early release applications continue to slow
The rate of applications to the early release scheme continues to slow.
APRA’s most recent data for the week ending 16 August, shows 70,000 applications were received by funds. This is half of the number of applications received two weeks ago.
Of the applications received by funds, 40,000 were initial applications and 30,000 were repeat applications. This brought the total number of initial applications to 3.1 million and repeat applications to 1.2 million since the inception of the scheme.
Since the scheme’s inception, more than 4.3 million applications have been lodged with the ATO, and nearly $32 billion paid out.
The average payment made over the period since inception is $7,686 overall and $8,468 when considering repeat applications only.
APRA article on super fund liquidity
APRA has released an article on the early effects of Covid-19 on the super industry, the impact of the early release scheme and APRA’s response.
APRA reflects on the early effects of Covid-19 on the super industry, the impact of the early release scheme and APRA’s response. It also outlines their expectations of the road ahead, this includes that trustees should put particular emphasis on reviewing their Liquidity Management Plan, including:
In addition, where liquidity stress testing is outsourced to a third party (such as an asset consultant), ensuring the necessary arrangements are in place to enable stress testing to be adequately updated to reflect rapidly changing environments, and the outcomes from stress testing are made available in a timely manner.
ATO reuniting accounts worth $3.2 billion
The Government has reported that that the ATO has reunited almost 2.53 million accounts with almost $3.2 billion in savings. These accounts are reunited under the ATO’s powers to proactively unite low-balance, inactive accounts with active accounts.
Choice Bill passes with amendments
The Government’s Bill preventing Enterprise Bargaining Agreements nominating only one superannuation fund in a workplace has passed through Parliament with amendments.
The Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019 includes changing the application date to 1 January 2021 and requires APRA to conduct a review into the operation of the amendments.
The purpose of the review is to:
The review must be completed before the end of the period of 30 months beginning on the day the Act commences.
The new measure is not retrospective and applies to new workplace determinations and enterprise agreements made on or after 1 January 2021.
AIST has previously raised concerns regarding the potential of the legislation to prejudice interests of some super fund members as it puts at risk the additional superannuation benefits, such as higher super contribution rates than SG, enjoyed by many employees covered by EBAs.
December MySuper Heatmap update
APRA has updated its MySuper Heatmap FAQs, with information relating to the next iteration of the fees, costs and performance data project.
As reported in a policy alert earlier this week, the period reported on will be up to 30 June 2020 for investments. Fees and costs data will be based on Product Disclosure Statements as at 1 October 2020.
The Heatmap will also provide indicators of trends in a trustee's operations relevant to the sustainable delivery of member outcomes.
Funds need to provide data to APRA via Direct to APRA (“D2A”) by 5pm on 29 October 2020.
Any updated data received by APRA after the deadline will not be included in the 2020 MySuper Product Heatmap. This data will be included in the following publication of the 2021 MySuper Product Heatmap, planned for release in December 2021.
APRA to release topic papers on data transformation
APRA has confirmed it intends to release four topic papers as part of its data transformation project later this week or early next week.
The topic papers will cover:
AIST understands the consultation will be staggered with a break between due dates for feedback for the topic papers.
Update on AIST Governance Code
The AIST Governance Code was published in 2017, piloted in FY2018 and reported against in FY2019. The Code is intended to be reviewed on a triennial basis in order to ensure that it remains relevant as a leading practice document, with a review originally scheduled for FY2020.
However, in light of the legislative delay in the progression of a range of Royal Commission-related governance recommendations, which will likely impact on the content of a revised Governance Code (including the Financial Accountability Regime (FAR)) AIST has decided to make some changes to our approach.
AIST’s Board has endorsed:
This approach does not impact fund reporting for FY2020 reports (due 30 September). Should your fund need assistance around this year’s reporting, or you wish to discuss the changes noted above, please contact Holly Lindsay, Senior Manager Governance at email@example.com
ASIC adjusts relief application process
ASIC is now requiring all applications for relief from aspects of the Corporations Act and the SIS Act to be made via its regulatory portal, rather than via email.
Trustees who are applying for relief or no action will need to register to use the portal as a first step in the process.
The manner in which ASIC considers applications will remain the same, with RG 51 still an important starting point when drafting the application itself.
Further information about applying for relief can be found here.
Super assets dip in year to 2020
Australia’s super savings pool has reduced in size in the year to 2020, with a marginal fall of 0.6 per cent.
APRA’s latest Quarterly Super Performance Publication shows total super assets of $2.86 trillion at June 2020, compared to $2.88 trillion at June 2019.
Total assets in MySuper products experienced the greatest fall, reducing by 3.3 percent to $731 billion.
The drop in overall assets resulted from negative asset growth in retail funds and SMSFs. By contrast, the profit-to-member super sector grew by 1.98%.
However there was strong growth in the last quarter for the retail sector which increased in size by 5.92%, compared to a 2.8% increase of assets in the profit-to-member sector, the latter recording a large jump in lump sum benefit payments related to the temporary early release of super scheme.
PSSAP bill passes House of Reps
A Bill to expand the circumstances in which a former PSSAP member can use their existing PSSAP account in respect of any employment has passed the House of Representatives.
The Superannuation Amendment (PSSAP Membership) Bill 2020 is currently before the Senate.
AIST’s weekly update on the status of legislation
The current status of superannuation Bills currently before Parliament can be found here.