The Australian Securities and Investments Commission (ASIC) has said that a number of superannuation funds have failed to provide accurate information to members about the impact of the early release scheme on their insurance.
According to a report in Investor Daily, Ms Jane Eccleston, ASIC senior executive leader of superannuation, said the regulator had identified a lack of or misleading information about the impacts of early release on insurance and eligibility. She was speaking at the Australian Institute of Superannuation Trustees (AIST) Super Risk Symposium.
Trustees are expected to communicate with members about any loss of insurance as a result of withdrawing under the scheme, particularly when they have cleared out their accounts.
“Several funds have struggled, for instance, to provide accurate information about the impacts on low balance and inactive accounts,” she said.
“ASIC has published an FAQ which sets out our expectations, that trustees communicate in a clear and balanced way to the members about how accessing early release may affect insurance cover and the options that members have if their insurance cover is lost. For some, this means [personal] communication about [the] loss of insurance.”
The government is allowing early withdrawal of part of contributors’ superannuation funds for those who are adversely financially affected by COVID-19.
Ms Eccleston said, “There’s still some way to go before we understand the full impact of the pandemic and this [flow-on] to the insurance held by members to superannuation.”
Meanwhile, the government has announced that it will extend the early super access scheme. The application period for early access to superannuation will be extended from 24 September to 31 December 2020 for individuals who are still financially impacted by COVID-19.
The extension has the potential to further crystallise the impact on retirement savings, said Future Super co-founder Kirstin Hunter, with people forced to choose “between a liveable retirement and food on the table”.
The most recent APRA figures put early super withdrawals at $28bn ($20bn).