Super funds hand out $6 billion
Superannuation funds had issued early release payments to 830,000 members totalling $6.3 billion at May 3, according to the latest data on the scheme from the Australian Prudential Regulation Authority (APRA).
The average payment was $7629, while the average payment processing time was 3.1 days following notification by the tax office. Of the 142 funds to make payments, 117 have done so within APRA’s guideline of five business days.
APRA deputy chair Helen Rowell says the figures demonstrate that superannuation trustees understand the importance of getting payments as quickly as possible to members who may be enduring financial hardship. “This is a new scheme, and some funds have received tens of thousands of applications, so an average payment time so far of 3.1 days following receipt of applications from the ATO is a positive story,” she says.
“We recognise, however, that it may be both necessary and appropriate for trustees to take longer in some cases. This is no doubt frustrating to those awaiting payments, but the recent attempted fraud being investigated by the Australian Federal Police emphasises that care is needed to ensure payments go to the right people.”
A small number of claims have been rejected by funds due to anomalies or concerns regarding evidence of fraud or potential fraud, or because an account had been closed or an invalid bank account number supplied. Some applicants have also withdrawn their application.
Listed property assets are faring well during the Covid-19 crisis, according to First Sentier Investors. “One noted difference between now and 2008 is the extent of the drawdowns,” says Stephen Hayes, head of global property securities. “It was much less extreme than what we experienced in the GFC. Clearly today is just a point in time and market volatility continues to be high at this stage, but the extent of the sell-off in the GFC was much greater.”
Hayes believes the listed property sector learned some hard lessons from the GFC, which has left it better prepared this time.
“Boards and management teams have mostly heeded the cautionary tale of 2008. They’ve resisted the temptation of cheap credit, instead shoring up their balance sheets through equity raisings and asset sales. They have lower loan-to-value ratios, lower debt and higher interest rate coverage.”
While it’s difficult to generalise, there are some distinct differences between various forms of retail real estate, he says. Convenience and subregional shopping centres, for example, offer high levels of non-discretionary spending, so they’re less exposed to the growing threat from ecommerce.
However, larger regional shopping malls are a different kettle of fish. “I expect these assets to carry higher natural levels of vacancy in the future and have lower levels of market rents. But that does not mean those assets still can’t provide economic returns over time.
“Many of these assets sit in urban infill locations in some of the world’s most bustling cities where land is scarce, and the land on which they reside is rare and valuable. So there are still high amounts of intrinsic value in these assets.”
Retirees are increasingly turning to annuities to fund their lifestyle, according to new research at Melbourne Business School. Annuities provide fixed, guaranteed payments over time, unlike account-based pensions or personal investments, which rise or fall with the sharemarket.
Previous studies have shown that industry and government professionals largely have a negative view of annuities. “There’s a belief that Australians ‘hate’ annuities, which is a strong word, but it’s the one that gets used,” says senior research fellow Teagan Altschwager.
“When we talked to financial advisers and people from super funds and government about annuities, most of them said they thought customers didn’t like them or understand them, leading them to not purchase.
“Our research shows that is only partially true, in that customers do struggle to understand annuities, but there would likely be much greater demand if the options were presented in a simpler way.”
The research found that people are just as interested in annuities as they are in traditional “drawdown” options, such as account-based pensions.
“What I found most surprising was the relative size of the annuity group to the drawdown group,” says Altschwager. “Based on industry attitudes, you might expect the annuity group to be much smaller, but in our data it was essentially the same size. To me, this suggests there is far greater appetite for annuities than people think and that account-based pensions may be the main product in the market simply by default or out of ignorance, rather than actual preference.”
However, consumers find choosing between annuities difficult. “Based on our findings so far, it may be better to describe attitudes as ‘Australians don’t hate annuities, they just hate making complicated choices’,” says Altschwager.
Responsibility for clarifying and advising on annuities lies with policymakers, financial planners, fund managers, and others working in the financial or retirement sectors.
“Industry and government both seem committed to shifting people’s mindset from focusing on accumulating as much money as possible for later life, and instead getting them to think about how to use that money and make it last for retirement,” she says. “Annuities are one viable option for achieving this.”