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Low income earners and women hit hard by early release scheme
AIST has warned against any extension of the early release super scheme beyond the end of this year, noting that many low paid young workers and low-income earners have already depleted their super accounts.
Demographic data released from Treasury in response to ‘questions on notice’ asked by Labor Senator Katy Gallagher shows that 62 per cent of scheme applicants were aged 40 and under with the age groups between 26-30 and 31-35 having the highest number of applicants.
The data also shows a marked drop off in the number of young applicants for the second tranche of the scheme. By contrast, the number of older applicants has risen in the second tranche. This is more likely an indication that younger members have drained their accounts in the first tranche than their financial situation improving substantially and not needing to make a second withdrawal.
As reported in the AFR and the Australian this week, AIST urged the government not to extend the scheme beyond the end of this year, noting that that the early release scheme has come at huge cost to retirement savings of low paid Australians at a time when it has never been cheaper for the Government to borrow money to provide income support to vulnerable Australians.
AIST CEO Eva Scheerlinck stated that we now have a generation of young Australians missing out on the benefit of super returns that average around 7% year, when the Government could be borrowing money at near zero interest rates to provide a similar, and more targeted, level of financial assistance to those in need.
Meanwhile, APRA’s latest early release update shows that since inception, 3.9 million applications have been lodged with the ATO. Of these, 2.5 million were lodged before 30 June. Of the 1.4 million lodged since 1 July, 1 million are repeat applications.
Over the week to 26 July, the total value of payments during the week was $1.4 billion, with $29.4 billion paid since inception. The average payment made over the period since inception is $7,705 overall and $8,547 when considering repeat applications only. The higher average withdrawal is a reflection of the demographics of the repeat applicants, that is they are older and therefore more likely to have higher balances from which to withdraw the total of up to $20k.
As at 26 July 2020, 96 per cent of applications received since inception had been paid. This is an increase from the previous week (94 per cent) as funds continue to process the large volume of applications received in early July.
In other news this week on early release, Labor has asked the Auditor-General to provide more transparency around fraud incidents involving the scheme.
Litigation a vital third arm of active ownership: HESTA
HESTA has urged the Parliamentary inquiry into litigation funding to focus on reforms that enhance access to justice and decrease cost to litigants, noting that litigation has an important role to play as a “third arm” in active ownership alongside active engagement and proxy voting.
Appearing before the Parliament Joint Committee on Corporations and Financial Services inquiry into litigation funding and the regulation of the class action industry earlier this week, CEO Debby Blakey and HESTA’s Head of Impact, Mary Delahunty, warned the Committee to avoid any changes to litigation funding that could stifle the access for individual shareholders to enforce their rights.
“What we are seeking as shareholders is that any area of reform should be focused on facilitating a well-regulated class action…For us, it is critically important that the regulatory or compliance burden should not become so complex or so significant that it would defeat the stated purpose of ensuring greater returns to members of a class action,” Ms Blakey said.
Responding to a question from Liberal MP Jason Falinksi as to why a super fund would sue a company that it invests in, Ms Blakey noted that as a long-term investor, HESTA needed to protect and enhance the value of companies.
“If in the short term, there has been egregious behaviour, a failure of corporate governance or breaches, we believe that actually bringing that to the fore for a class action and recovering losses also actually gives us the opportunity to raise the bar in terms of corporate governance in the long term.”
Ms Delahunty outlined several examples where class action had not only led to shareholders being able to recoup losses but had ultimately led to positive outcomes for the companies and systemic reform across the corporate sector.
The Committee heard that HESTA is currently involved in about 20 active class actions.
Click here for a full copy of the Parliamentary transcript.
The Inquiry, announced in May this year, is due to report by 7 December 2020.
No ATO deferral for unclaimed monies
The ATO has told AIST that it does not intend to defer the 31 October 2020 Unclaimed Super Monies (including low balance inactive) payment date for accounts that met the criteria at 30 June 2020.
The ATO had previously deferred the payment of amounts that met the Unclaimed Super Monies (including low balance inactive) at 31 December 2019 which was due to be paid to the ATO by 30 April to 31 October (the next period’s USM date).
This was in part, to allow members to apply for their super to be released under Early Release Super Scheme who would have otherwise had their balance sent to the ATO and in part due to the workload associated with the commencement of the ERS scheme on 20 April.
The ATO believes the current environment does not necessitate a further delay.
Vic Govt confirms super is a permitted industry under lockdown
As outlined in AIST policy alert today, the Victorian Government has clarified that Melbourne-based super funds are permitted to send limited staff to their workplace to continue operating for the provision of superannuation services and processing and payment of superannuation roll-overs, transfers and withdrawals.
The information has been added back onto the DHHS website following its removal overnight.
Govt releases 2020 cyber security strategy
The Government has released a cyber security strategy in a bid to combat growing cybercrime, including on the dark web.
The 2020 Cyber Security Strategy invests $1.67 billion to build new cybersecurity and law enforcement capabilities, protect essential services, assist businesses to protect themselves and raise the community’s understanding of how to be secure online.
While noting that not all cyber security risks can be addressed by government, the strategy outlines steps businesses can take to protect themselves and their customers.