APRA along with ASIC have both published answers to frequently asked questions about the responsibilities of superannuation trustees during the COVID-19 crisis.
Among other answers, the prudential watchdog indicated that the Superannuation Industry (Supervision) Act (SIS Act), requires a registrable superannuation entity (RSE) licensee to pay the benefit to the member “as soon as practicable, after having received a copy of a determination from the ATO”.
The early super release measure, which will commence from Monday, will allow individuals in financial distress to withdraw up to $10,000 of their super before July and a further $10,000 from July until September.
As at a week ago, more than 600,000 fund members have registered their interest in the scheme according to ATO data. A spokesperson for Industry Super Australia told Investment Daily sister publication ifa that funds are bracing themselves for a 4,000 per cent yearly redemption swell.
APRA has the expectation that where automated checking has not identified a red flag, payments will be made for the majority of cases within five business days of instruction from the ATO.
Payments may only take longer in exceptional cases, the regulator said, such as where there may be a red flag or potential fraud. The timeframe may also be extended “slightly” where an RSE licensee experiences a high volume of applications.
Assistant minister for superannuation, financial services and fintech Jane Hume has welcomed the recommended timeframe.
“Given the importance of cash flow for many people at this critical time, the Morrison government expects super funds to be paying members their money as quickly as possible, and within five days,” Senator Hume said.
“We understand this is a very challenging time for all Australians. These measures will ensure that Australians impacted by the COVID-19 pandemic will receive this vital financial support as quickly as possible.
“This is an opportunity for the super funds to demonstrate their commitment to their members at the time they need it the most.”
The process for determining and paying amounts under the COVID-19 early release measure has been noted to be different to the usual process for making payments under existing early release grounds – fraud control compliance has been relaxed.
“The AML/CTF Rule exempting RSE licensees from undertaking up-front customer verification means that RSE licensees will, in most cases, have less RSE licensee-verified information upon which to form a view about a payment,” APRA stated.
“However, the security controls around the application process and the RSE licensee appropriately acting on red flags identified by their automated checking process will mean that for the majority of applications it will be reasonable for RSE licensees to depart from their usual fraud control measures in order to ensure payments are made to members as soon as practicable.”
APRA added that if fraud occurs regardless, but the RSE licensee is able to demonstrate it followed the recommended approach, the regulator would be unlikely to take action.
It has also said in light of the additional pressures on the administration of super funds, trustees should be working closely with their administrators and must ensure they have contingency plans for critical activities, including the day-to-day payment of benefits, processing rollover requests, investment switches and early release payments.
Sarah Simpkins
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].
