Via the ABC:
Nearly 618,000 Australians have applied to get an early release of their superannuation under the Federal Government’s plan to help people out of work and facing financial hardship during the coronavirus pandemic.
From April 20, the Morrison Government is allowing retrenched workers and those suffering financial hardship because of shutdowns to access up to $20,000 in super and take it out tax free.
The first $10,000 is available between mid-April and July 1, and the second $10,000 is available after July 1 for about three months.
The Australian Taxation Office (ATO) said as of midnight April 8, it had 617,800 registrations of interest, but could not yet estimate how many people would be eligible to draw down.
So, if the registered withdraw the full allowed balance, that’s $12 billion in total. Treasury has estimated the number at $27 billion. The AFR is reporting that the Council of Financial Regulators is not interested:
…The RBA-chaired Council of Financial Regulators last September considered arrangements for managing liquidity at superannuation funds during periods of market stress.
“They agreed that existing arrangements provide an appropriate incentive for superannuation funds to manage their liquidity and that circumstances where a systemic liquidity problem could arise for the superannuation system were highly unlikely,” the council noted at the time.
“Members concluded that no additional measures, including access to liquidity from the Reserve Bank, were warranted.”
The statement was pre-coronavirus but it is understood the financial regulators have not changed their position since the outbreak….If the RBA steps in with emergency cash, regulators are wary that would create a precedent and expectations that funds would get support in future crises and therefore not manage their asset allocation and liquidity prudently.
Exactly. These businesses represent no systemic risk. The shift to limited early redemptions is a shock but such regulatory risk is a constant.
If super funds have to sell assets and crystalise losses then so be it. That will make plain to members that their funds have not managed liquidity prudently and it will drive capital to better risk-adjusted returns.
Not to mention that, if we’re not at the bottom (which is the MB view), then selling now will do the funds a favour!