The stock market crash and a lack of diversity in membership are no excuses for superannuation funds to not help those seeking their cash early, a senior member of the federal government has warned.
Assistant Minister for Superannuation Jane Hume issued the warning in a speech to the sector as it deals with the impacts of the economic crisis caused by the coronavirus pandemic.
The government is allowing people who have lost jobs or income in the crisis to take out a tax-free $10,000 from their superannuation between April and June and another $10,000 between July and September.
It's estimated some $27 billion could be withdrawn early.
This represents only about one per cent of the $3 trillion superannuation industry.
Watchdog the Australian Prudential Regulation Authority has told the government these withdrawels shouldn't have a significant impact on the sector overall.
However, Senator Hume said the crisis had uncovered a structural weakness in superannuation - a failure to diversify fund membership.
"Those funds whose members are congregated in sectors hardest hit by the virus, particularly smaller funds, unless they have risk-managed their investments for a crisis, may find this period very uncomfortable," she told the AFR banking and wealth summit via video address on Monday.
"However, I want to say today, that discomfort is no excuse to not release members' money - their own money - in a time of need."
Her comments are likely aimed at industry super funds which traditionally draw members from a particular sector, such as retail or hospitality workers.
Similarly, Senator Hume said the state of the stock market, which has plummeted over recent weeks, was also not an acceptable excuse to not release money if members were approved by the tax office to get early access.
A lack of planning for a situation along the lines of the current crisis was a collective failure of imagination, she said.
"Any fund who refuses a member access to their money after an ATO determination is essentially admitting that their investment governance was cavalier or their systems inadequate," she said.
"I can't imagine a bigger signal to members, to the media and to regulators."
APRA was given stronger powers after the royal commission into banking, and Senator Hume says these "new teeth may well be tested" if it was revealed funds had been managed in ways that prevented members promptly accessing their own money.
Australian Associated Press