NEWS
APRA canvasses COVID-19 super fund exits
Assets under custody drop 7.7% BY JASSMYN GOH
BY MIKE TAYLOR
The extended period of the COVID-19 pandemic may hasten the exit of some superannuation funds, according to the Australian Prudential Regulation Authority (APRA). In an analysis within its latest corporate plan, APRA pointed to the challenges facing superannuation funds as a result of the COVID-19 pandemic and the associated hardship early release superannuation arrangements and noted that the longer the situation continued the greater challenges would be. It then said that the “pandemic and associated impacts will also continue to accelerate viability and sustainability issues facing some superannuation funds, particularly those who were already showing indications of challenges in continuing to be able to sustainably deliver quality outcomes for members”. Elsewhere in its analysis, APRA also noted that beyond the pressures being exerted by the early release scheme, “rising unemployment will continue to impact the cashflow of superannuation funds as contributions are likely to slow and outflows are expected to remain elevated”. “Service continuity within both funds and service providers such as administrators has generally been maintained despite increased member activity, including high call volumes and the need to manage early release applications expeditiously. However, sustaining service levels through an extended period of substantially remote working will require careful management,” the analysis said.
Assets under custody in Australia has declined 7.7% to $3.75 trillion over the six months to 30 June, 2020, according to Australian Custodial Services Association (ACSA) data. ACSA said the fall in assets was largely a result of market valuation impacts and the spike in transactions reflected the level of activity by underlying institutions adjusting their portfolios in response to the COVID-19 pandemic. State Street had the largest decline in assets, down 20.8% to $405.2 billion, followed by a 10.2% decline for HSBC Bank to $179.8 billion, and a 9.3% decline for BNP Paribas to $463.3 billion. Only Netwealth ($31.5 billion) and BNY Mellon ($27.1 billion) increased their assets at 10.5% and 10.2% respectively. J.P. Morgan had the largest amount of assets at $820.2 billion. ACSA chief executive, Robert J Brown, said: “According to a recent ACSA member survey, 82% of asset servicing professionals are working from home. At the same time we have witnessed record volumes of transactions in the market. Despite the obvious challenges, there has been minimal disruption to service provision. “Although our industry is highly automated, there are exceptions. Asset servicing providers have needed to adapt to the social distancing and movement restrictions under public health orders, and this has created challenges for handling physical documents. Mail room and vault access, support for transactions that require wet ink signatures and physical cheques all triggered changes to process for custodians, registries and other key players in the service chain.”
Repeat early release members took out average $16k The average superannuation member fund that used the early access to super scheme twice has taken out $15,854, according Australian Prudential Regulation Authority (APRA) data. APRA data found the average initial application amount was $7,402 and the average repeat application was $8,452. APRA data has showed that applications for the hardship scheme has tapered off with 59,000 applications over the week to 23 August, a drop from 70,000 the previous week. Over the week, 35,000 were initial applications and 24,000 were repeat applications. This has brought the total number of initial applications to 3.1 million and repeat applications to 1.2 million since the start of the scheme. The total amount paid is now at a total of $32.2 billion with 10 funds accounting for $21.2 billion. The top 10 funds that had paid out the most were AustralianSuper ($4.48 billion), Sunsuper (3.26 billion), REST (2.96 billion), Hostplus ($2.8 billion), Cbus ($2.06 billion), HESTA ($1.6 billion), Retirement Wrap ($1.5 billion), MLC Super Fund ($1.91 billion), and Retirement Portfolio Services ($983.6 million). 5 | Super Review
04SR100920_01-16.indd 5
2/09/2020 2:32:36 PM
