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Early release update
One in four Australians plan to access their super through the second tranche of the COVID early release scheme, according to a new survey from Fidelity Investments.
Fidelity’s latest ‘Pulse Survey’ explored the impact of Covid-19 on people’s finances, as well as their overall wellbeing. It found 26.1% of people plan to take the opportunity to access their superannuation early in the next 12 months, with almost half (45.7%) of Australians say their worry about money has increased since the COVID-19 crisis began.
The survey comes as APRA’s latest data (up until the week ending 28 June) showed that more than 2.5 million Australians have applied for early release through the first tranche, worth a total of $18 billion. Meanwhile the latest ATO figures, as reported by News Ltd, show that 3 million applications have been approved, totalling $25 billion.
It now seems inevitable that the total amount being withdrawn from the scheme will exceed the government’s estimates of $27 billion, particularly given the rush of applications when the second tranche of the scheme opened on 1 July. While some funds having seen a tapering in application rates since then, demand is expected to remain strong in light of the impact of Victoria returning to lockdown.
Ironically, the high demand to access super coincides with a more conservative approach to spending and investing, with the Fidelity survey finding Australians would cut back spending rather than sell down investments during the crisis.
Just over half (54.0%) of survey respondents said they would reduce spending on essential items like food and clothing during the next one to six months, over other actions such as selling shares, property or other assets.
When it comes to financial security, job security is the number one concern. Almost one in three (29.4%) of those currently employed are worried about job security, far more than the pre-pandemic level of less than one in five (18.0%). This skyrockets to 45.4% among those in casual employment.
More than half of people (55.4%) say they could only last three months or less if they were suddenly made unemployed, including 16.9% who would not be covered at all.
Key trends shaping post-Covid consumer sentiments
A KPMG survey of over 1,500 people suggests members’ sentiments toward superannuation, insurance and financial advice will shift due to Covid-19, possibly leading to further migration of members from retail super funds into the profit-to-member sector.
The report suggests the trend of retail outflows is set to continue with 23 per cent of retail members very likely to switch funds, compared to 9 per cent of industry fund members. Those seeking to switch are seeking better value.
Digital offerings and service flexibility were found to be not just valued by members but expected as a basic feature of super, insurance and advice products, with the report stating, “73 per cent of consumers want flexibility in products and services to match their changing needs.”
Digital member communication channels are valued for their convenience, 24/7 availability and a perception that they are a faster means of communicating with the fund.
While mobile apps rate highly, email was found to be the preferred channel of communication.
Additionally, 58 per cent agree that it is important for super funds to provide them with financial advice as a result of Covid, though only 32 per cent indicated a willingness to pay for it.
ASIC focus areas for financial reporting
Super funds reporting on the year ending 30 June will be expected to focus on key areas that provide adequate disclosure on areas most impacted by the Covid-19 pandemic, with ASIC releasing an updated FAQ and guidance on its reporting expectations.
ASIC stated in a media release that directors, preparers and auditors of reporting entities should focus on the following areas to provide adequate disclosure and transparency:
‘In the current environment, the quality of financial reports and related disclosures is more important than ever for investors and to maintain confident and informed markets,’ said ASIC Chair James Shipton.
‘Entities with businesses adversely affected by the COVID-19 pandemic should focus on the reporting of asset values and financial position. Investors will expect clear disclosure about the impacts on an entity’s businesses, any risks and uncertainties, key assumptions, management strategies and future prospects.’
Regarding complex areas, such as asset values and other estimates, ASIC has stated that appropriate experience and expertise should be applied in the reporting and audit processes, and that Directors and auditors should be given sufficient time to consider reporting issues and to challenge assumptions, estimates and assessments.
ASIC has extended the deadline for both listed and unlisted entities to lodge financial reports by one month for certain balance dates up to and including 7 July 2020 balance dates.
For further information, see ASIC’s COVID-19 implications for financial reporting and audit FAQ.