The Australian Business Review
18 May 2020
Cliona O’Dowd – Journalist
Super funds paid out $9bn in early release payments in the three weeks to May 10, with just five industry funds bearing the brunt of the pain, shelling out $4.3bn to members battling through the coronavirus crisis, according to data released by the Australian Prudential Regulation Authority.
Funds across the sector received 1.34 million applications for early super access between April 20, when the scheme opened, and May 10, with 1.19 million of those paid out by the same date, the regulator announced on Monday.
Industry funds have been hardest hit by the government scheme, with AustralianSuper already leaping past the $1bn payout, and Hostplus, Sunsuper and REST not far behind.
As at May 10, AustralianSuper had paid out $1.14bn to members. This compares with the $909m Hostplus had forked out and the $932m and $812m paid by Sunsuper and REST. CBUS rounded out the top five, shelling out $474m to members over the three-week period.
Sunsuper was among a handful of funds that paid out all member applications within the five-day time frame, while the other major industry funds paid more than 95 per cent of requests within the APRA-imposed deadline.
While the biggest funds have to date coped with the deluge of withdrawal requests, a number of smaller funds have been slow with their payouts.
Among the worst offenders has been Australian Catholic Superannuation and Retirement, which paid out funds within the five business day time frame just 15 per cent of the time and up to nine business days just 32.6 per cent of the time.
Intrust Super Fund, Retirement Benefits Fund, BT’s Advance Retirement Suite have also been dragging their heels, as has Qantas Super, which has so far paid out funds in the five business days just 51.5 per cent of the time.
Across the industry, the average payment made was $7546. Funds are taking on average 3.3 business days to pay members, while 94 per cent of applications are being paid within the expected five-day time frame, APRA said.
The update from the regulator comes after research house Chant West revealed that super fund performance bounced back in April as sharemarkets around the globe rallied despite the threat of a worldwide recession due to the coronavirus pandemic. It follows a dismal March performance that saw funds suffer their worst monthly returns in close to 30 years.
The median growth fund, which typically is 60 to 80 per cent invested in growth assets, bounced back 3.1 per cent in April, according to the latest date from super research house Chant West.
But the gain wasn’t enough to fully offset the 12 per cent battering funds took in February and March, leaving the return for the ten months of the financial year to date in the red at -3.3 per cent.
“April saw share markets rebound as investors grew more optimistic around coronavirus curves flattening around the world, the expectations of lockdowns easing and economies starting to reopen, partially at least,” Chant West senior investment research manager Mano Mohankumar said.
“While this provided some relief after the pounding markets took in the previous two months, it’s still far too early to tell what the full impact of COVID-19 will be on individual companies, industries and the global economy.
While the median growth fund gained just over 3 per cent in the month, the median balanced option returned 2.3 per cent and high growth returned 3.9 per cent.
Super members should brace for further volatility ahead, Mr Mohankumar warned, as he cautioned against members switching to less risky options without taking financial advice first.
“Unfortunately, super funds have already seen some members hurt themselves by locking in losses in March by switching to a more conservative option perhaps with the intention of switching back later as markets rallied. This is the very thing we caution against,” he said.
“If you take panic action after share markets have already fallen you only convert paper losses into real ones. Not only that, you also risk missing out when markets rebound as they will at some point. Being out of the market during share market volatility, even for a few key days, can make a significant difference to your returns.”
The Australian sharemarket bounced 9 per cent in the month, while international shares were up 10.6 per cent in hedged terms. Factoring in the rise in the Australian dollar over the month, international shares gained 3.6 per cent, unhedged.