Under Super Early Release (SERS), the ATO approves the release of money from superannuation accounts. However, funds will be responsible for executing benefit payment requests. Payments will follow the established process for early release on compassionate grounds.
A key distinction to the current process is that SERS involves payments on a far greater scale (466,000 ATO approvals to date), a fast turn-around-time and reduced scrutiny of the reason for the payment.
While this process will no doubt assist many thousands of Australians suffering financial hardship, it unfortunately also increases the risk of fraud.
AUSTRAC is the government body that monitors suspicious financial transactions. In response to the coronavirus pandemic, AUSTRAC has made a rule under the Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF) to ensure that superannuation funds making ATO-approved payments don’t have to conduct additional customer verification under the AML/CTF regime.
This serves the purpose of speeding up the process for super funds, however it also creates additional opportunity for fraud to be successfully perpetrated in the form of unauthorised ATO approvals being issued. Responsibility remains with super funds to satisfy themselves that they are dealing with a bona fide application, whilst balancing the pressures to complete payment of monies to people in need.
This isn’t an academic or theoretical concern. Funds and government agencies have already detected attempts to defraud people of their super. An example of this is the ACCC has stated that scammers are cold-calling people claiming to be from organisations that can assist members to obtain early access to their superannuation account.
The super industry and the ATO must work closely together to ensure that fraud monitoring and detection systems continue to work well, safe-guarding member’s super. In particular, vulnerable Australians seeking to access their super are acutely at risk.
The protection in place includes funds having to notify AUSTRAC and the ATO of suspicious activity. For example, there may be some questionable bank accounts that are used multiple times. A process must be put in place across whole of the industry and government bodies, that identifies and “red-flags” these types of bank accounts. This action must be implemented asap to enable a quick response and provide the necessary protection of members’ money.
If you would like more information, please contact IQ Group at: firstname.lastname@example.org.
Senior Consultant Fraud and Regulatory Compliance – IQ Group
What a difference a month can make! Never in their wildest dreams would financial services companies have thought they would have the majority, if not all, of their employees working from home, online and in most cases doing it successfully.
In a swift few weeks, Covid-19 has seen companies scramble to find new ways of doing business to keep their ‘virtual doors’ open. It may not be ideal, and there has no doubt been teething problems, but it is primarily working.
So now that it is working, how can financial services companies use this as the push they needed to create new ways of operating? Now more than ever, they will want to be focusing not only on keeping their costs low but retaining their members and customers too. Sure, growth would be great, but at this point in time, just retaining your customer base goes a long way in enabling companies to stay afloat. And what about those companies that have some of their services delivered from offshore? Now that the world has closed, has the cost cutting and retaining profits for investors, left financial services companies in a vulnerable position?
Does the Covid-19 crisis open the door for businesses to rethink how they operate?
Our Covid-19 working arrangements have shown that you can do the majority of things working from home. This includes call centres and back office processing. Where previously the argument has been that a call centre and processing can only be run from an office where everyone is together, the Covid-19 situation has challenged this thinking.
For some this has become an opportunity to rethink their offshore strategy and they are now embracing the opportunity to set up at least a portion of their operations onshore; such as work from home call centres and processing. For some this new hybrid model which includes work from home solutions not only provides economic advantages, such as a reduction in office space; it also provides balanced working options for employees.
This new thinking is not limited to how we operate. It also extends to how we communicate.
Now is the time for financial services companies to increase communication and find new ways to help educate their members as well.
Research from the UNSW Centre of Excellence in Population Ageing indicates that by increasing members financial literacy, members demonstrate more positive behaviours when it comes to planning for their retirement.
By creating and producing online education material, members are provided with the information they need to take control.
At IQ, we want to embrace this change and continue to navigate new and different ways of working for our customers, our industry and for our people. Let’s find solutions that build trust and integrity and continue to prove why we are living in the lucky country.
The IQ Group is here to help and support you as you explore our changing world. If you would like to utilise our services, please contact us at: email@example.com.
The coronavirus and the need for funds to be able to meet liquidity as a result of the increase in financial hardship claims from superannuation is creating uncertainty and delay on planned fund mergers. The Government on the other hand has suggested that funds lacking cash may be forced to merge.
More than 600,000 super fund members have already registered with the ATO to seek early release of some of their super. These members are suffering from severe financial hardship due to COVID-19 and loss of income and are choosing to access their superannuation early to ease the burden – even through this might not be in their best long-term interests.
Medium-sized funds MTAA Super and Tasplan announced in November last year that they were intending to merge on October 1 2020. In late March 202, they said that they now plan to delay their merger by 6 months. This is due to the sustained market volatility as a result of Coronavirus and concerns about the supply of specialist services like outsourced project teams. Despite the new timeline, they emphasised that the decision behind the merger and the benefits to members of both funds remain unchanged.
With the increase in staff utilising work from home due to the virus, MTAA Super CEO Leeanne Turner has said: “We think extending the merger timeline will ease stress and help our staff better manage workloads and their personal arrangements.”
Tasplan CEO Wayne Davy has said “By extending our merger timeline, we can focus on getting members the service, advice, and support they need right now. That’s always been a priority for us, but now it’s more important than ever.”
The issues mentioned by these funds are also faced by other funds, and there may well be other funds planning to merge that will also have to delay until the pandemic is over.
On the flip side of Tasplan and MTAA’s choice to delay their merger, treasurer Josh Frydenberg wants APRA to consider forcing mergers of industry super funds that are suffering liquidity problems due to the emergency COVID-19 withdrawals by members.
Frydenberg has said “The government expects APRA to exercise those powers in circumstances where it is in the best interest of fund members to do so.”
While Frydenberg’s wishes are at the discretion of APRA, and nothing is set in stone. It is an interesting insight into what’s to come in the future of fund mergers in the time of Coronavirus.
A lot is going to depend on how many people receive benefits under the JobKeeper scheme – those who do might not be under as much hardship – and then don’t need to access their super. It’s interesting though that this new way of accessing super is available a few weeks before Jobkeeper starts.
If you have any questions about the impact of coronavirus on fund mergers or need any assistance, please contact IQ Group at: firstname.lastname@example.org.
As the world battles with the spread of the coronavirus, the importance of pandemic planning for financial service organisations including superannuation funds cannot be understated.
The IQ Group recently held an internal discussion on pandemic planning. We discussed the key advisery players for superannuation funds and administrators – Federal Government, State Governments, World Health Organisation and in particular the Australian Prudential Regulation Authority (APRA).
These organisations provide important advice and direction to help organisations manage through the pandemic. While Governments provide directions for the nation and individual States, APRA’s focus is specifically on financial services organisations including RSE licensees.
What should superannuation funds be doing?
· considering publicly available information on pandemic risks, health and hygiene measures as well as tools for pandemic business continuity planning
· execute their pandemic plan
· establish an internal pandemic planning group
· communicate regularly with employees, suppliers and APRA (APRA expect to be informed of any significant impacts on operations, customers and financial condition)
According to APRA. effective pandemic planning generally requires a cross-disciplinary approach involving, for example human resources, business continuity management, security areas, business units and risk management functions within the organisation.
Organisations should have:
· Identified their highest critical business functions
· Co-ordinate between locations and be flexible – different locations may have different needs
· Assessed potential financial impacts
· Assessed potential staffing impacts
· Investigated alternative working arrangements and processing arrangements
We have already seen a significant number of financial services employees shift to working from home, which helps protect employees health, keep the organisation running, and is in line with the advice from the Federal and State Governments.
From our discussion it became clear that it is not the case of one size fits all – organisations need to be adaptable and continuously review and update their plans to cope with radiply changing circumstances.
In addition to various publications from Australia’s Governments (Federal and State), APRA has Prudential Practice Guide – CPG 233 – Pandemic Planning (May 2013) and the Association of Superannuation Funds of Australia (ASFA) has a Best Practice Paper on Pandemic Planning (Updated March 2020). These documents are a useful tool for trustees to navigate through this situation.
If you need help understanding pandemic planning and the available resources, please email IQ Group at: email@example.com.
Senior Business Analyst
All Australians are concerned about the future, and the reality or possibility of financial hardship as a result of this pandemic. While the Government has announced programs to help people, like the JobKeeper initiative that might benefit 6 million Australians, many people may be taking advantage of another Government announcement – to take some of their own money out of super.
It’s been estimated that up to $56 billion might be cashed out of super over the next 6 months – although the Government’s own estimate is $27 billion. This is at least 2% of the money in APRA regulated super funds, and perhaps quite a bit more.
The mechanism to allow this is an addition to the compassionate grounds early release of super on the basis of financial hardship caused by coronavirus. This means a release can be authorised by the ATO – rather than other financial hardship releases which have to be approved by a super fund (applying specified criteria).
This has been legislated as a temporary provision that will be available over two periods to 24 September. However, as many hundreds of thousands – perhaps even a couple of million members – will take advantage of this temporary opportunity, funds and administrators are scrambling to change what is generally a manual procedure for a small number of applications into an automated process for possibly millions.
It’s going to be very important that the industry get this right. If there are delays of many weeks or even months in processing these claims, there will be Government and community outrage.
There have already been more than 400,000 expressions of interest registered with the ATO. The first applications can be made on 20 April – a fortnight before the JobKeeper allowance becomes available
The key elements of the new early release provisions include:
- People eligible for early release must have, since 1 January 2020:
- Been made redundant
- Had their hour reduced by 20% of more
- Up to $10,000 can be withdrawn by 30 June.
- Up to a further $10,000 can be withdrawn between 1 July and 24 September
- Applicants make a self-assessment to ATO and are encouraged to use myGov
- While a phone service will also be available, it won’t be possible to submit paper forms
- The ATO will assess the claims and send successful determinations to super funds
- They’ll send a daily electronic file and the fund will pay members directly, using the bank account the ATO provides
- It’s up to the fund to decide if they verify the bank account but AUSTRAC has given funds an exemption from the AML/CTF rules to allow them to accept the details provided by the ATO
- However, unless AUSTRAC rules say you are required to accept the ATO determination (which they don’t) a fund may still be liable
For those who have lost their jobs as a result of the pandemic induced downturn in the economy this is likely to make a significant difference in their ability to support themselves and their families. It does however come at a cost! Members will be crystallising losses in superannuation investments, selling after significant falls in the value of shares and other assets and a loss of future superannuation earnings.
For superannuation funds this will require a new benefit payment type to administration systems in a very short period. It will require them to mobilise resources when many are working at home, depleted due to illness and offshore processing centres are not available. Funds will be under pressure to maintain service levels at a moment that matters for members.
Further, superannuation funds will need to readjust their portfolios to ensure they have the necessary liquidity for a significant loss of funds from the superannuation system.
Finally, it will be an important time for funds to ensure their members and employers understand what the fund is doing and what the options are available to members to get through a tough period.
IQ Group’s first online Q&A session during the coronavirus pandemic
Yesterday, IQ Group held a lunch time client forum. This was the company’s first online Q&A session during the coronavirus pandemic, and it ran successfully. Customers had the opportunity to ask their questions and IQ Group’s Head of Industry Insights, David Haynes, provided in-depth responses.
If you would like to find out more about the temporary new early release of superannuation changes, please contact IQ Group at: firstname.lastname@example.org.
Principal Consultant & Team Lead