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Brisbane; June 30, 2020 Australian Super Funds have called for greater policy certainty and collaboration to empower investments critical to meeting both the retirement needs of all Australians and to fuel the nation’s economic rebound in the aftermath of COVID-19.
The call was issued at today’s QIC Super Fund Media Roundtable, “Investing For Australia”, which was held on the eve of the second tranche of the COVID-19 Early Release Scheme for the 2020-2021 year.
CEOs from QIC, Sunsuper, Cbus, Hostplus, HESTA and Rest, who all combined oversee the retirement futures for 5.7 million members, acknowledged the early release legislation was a valid response to ease the financial hardship many Australians faced following COVID-19’s corrosive impact on the global and national economy.
The CEOs also emphasised that their Funds comfortably met the early release applications of members. APRA reported 148,000 members have been paid $15.9 billion since the scheme’s launch.[1]
The assembled CEOs acknowledged that the early release scheme provided vital support for Australians facing financial hardship. However, they said the sector needed certainty that access to super would continue to only be in very limited circumstances so funds could maintain the ability to make very long-term investments in assets underpinning our economy.
This uncertainty risked forcing super funds to increase their liquidity, undermining the industry’s ability to invest in nation building infrastructure vital to the post-COVID economic recovery.
HESTA CEO, Debby Blakey described Australia’s superannuation system as the “best in the world” adding: “We invest with that long-term mindset, and that has been incredibly valuable for Australia. It's incredibly important we don't lose that and we don't introduce a shift in this very long investment horizon funds have been able to focus on.”
Sunsuper CEO, Bernard Reilly said the COVID-19 early release scheme had also been a challenge for super funds as they were not “payment” organisations.
“Largely we're accumulation organisations, and so to be able to turn our organisations around to pay money out in such a short period of time, in addition to having volatile markets, has been a challenge for a number of funds,” he said.
David Elia, CEO of Hostplus added: “The pandemic is creating a lot of uncertainty and one of the challenges is getting clarity on the purpose and role of super. We still do not have federal bipartisan support around the objectives of super and hopefully in time we can get some fundamental agreement.”
Investing For Australia
The QIC Super Fund Media Roundtable also heard that in rebuilding the economy, super fund capital pools could be directed towards other vital asset classes in addition to infrastructure.
Ms Doyle said super funds played a critical role post GFC when there was “very little capital around the whole world”, pointing out the fund’s investment in the Collgar Wind Farm at that time, had since created an asset that generated up to 50% of Western Australia’s renewable energy reserves.
Ms Blakey said “we have to think about the world our members are retiring into” adding: “This is an amazing time to use the mindset that we've applied to solve issues through the COVID crisis to future challenges … we think this is just such an incredible opportunity for a green-led, inclusive recovery that can create long term sustainable employment, more resilient communities and, of course, a healthier environment. We wouldn't want to lose that opportunity.”
QIC CEO Damien Frawley agreed, adding active management was critical in unlocking the value in these assets, citing four of QIC’s investments in wind and solar across New South Wales and Queensland which will now deliver 2.4 million megawatts of power, powering 465,000 Australian homes and reducing 2.4 million tonnes in CO2 emissions.
“I do firmly believe that renewables are a sustainable source of alternative investment for funds … which is attractive going forward. They also generate jobs which are regionally based.”
Mr Elia said his fund is one the leading investors in the smart economy with approximately $1.7 billion committed to Venture Capital that would support new and emerging businesses which in turn will create jobs for Australian's. “We certainly haven't stopped investing. We've allocated over a billion dollars to listed Australian markets, participated in 54 ASX listed capital raisings and we're supporting dividend reinvestment plans to help those companies to re-capitalise to give them an opportunity to continue to invest over the long term.
Mr Reilly said building the retirement savings for members required a combination of finding which assets meet the opportunities as well as the current nation building piece required by Australia.
“There is a balance and we clearly battle with that balance every day and are looking for opportunities (for our members) both here and overseas,” he said citing Sunsuper’s investment into an overseas data centre which offered a better entry price as well as additional geographic diversification for members’ portfolios.
Mr Atkin added: “If we're able to invest in shovel ready projects, but at the same time, be thinking about energy efficiency, for example, or tapping into the renewable energy, then we're achieving two things that in our mindset will have a positive outcome force for society.”
Australians need to make an informed choice
The CEOs also identified the need for members to understand the future impacts to their retirement resilience if they opted to apply for early access of their super fund.
HESTA CEO Debby Blakey said her fund was concerned about a growing gap in retirement resilience after female members applied for early access when the super gap in retirement was already at 40%.
Ms Blakey said: “It is the 25 to 39-year-olds that have seen very big falls in their super balances. The median left is $3,600 and for the 18 to 24-year-olds it is even lower as many have taken their entire balances leaving just over $1000 as a median account balance.”
Mr Atkin said his fund was trying to make sure his members were aware of the significant ramifications of accessing their super early. “By accessing super they are robbing their futures to pay for the now and averages mask the real impact... that they’re going to need to work another 1.5 to two years to get back to where they were and based on fortnightly payments of the pension, when they retire they’ll have 5% less per fortnight as a result of dipping into the first tranche.”
Mr Frawley added that the “other end” of the demographic equation also had to be considered when discussing early release.
“What we need to contend with is the recession, and how long that runs, I think early retirement and forced redundancy … is an issue that we all need to set out to understand. Last week, Qantas flagged that there will be 6000 people leaving the organisation, which is just the start across multiple industries, and over the next year or two, this will present challenges in terms of managing portfolios and accommodating those people who want to leave or are forced to leave early.”
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1As at 31 December 2019
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