Superannuation trustees are facing three competing sets of problems as they deal with the unprecedented challenges posed by the COVID-19 pandemic, with investment governance, administration and operational effectiveness, and insurance all simultaneously competing for attention, according to new analysis from international professional services firm KPMG.
Early release of funds
As a result of the government's Early Release Scheme (ERS), superannuation funds find themselves implementing the means to fulfil their new responsibilities to members, while also finding their resources stretched as they deal with high volumes in their call centres, reported Financial Standard quoting KPMG.
Mr Damian Ryan, KPMG partner, said funds also have to be conscious of the pressure on third-party service providers, noting their capacity was also being tested by the current scenario.
"That creates an additional challenge in this environment, because you're not only controlling what's happening in your own trustee office, but you're also worried about what's the ability of your service provider to deliver in a challenging environment."
Mr Ryan admits though that the government's JobKeeper programme may provide funds with some relief from the Early Release Scheme, as more Australians remain employed.
The Scheme allows individuals affected by the coronavirus pandemic (such as those made redundant) to access up to A$10,000 ($6,000) of their superannuation in the current financial year ending June 2020 and a further A$10,000 in the next financial year starting on 1 July.
Liquidity
However, he says the liquidity issues facing super funds still persist, noting the specific profile of each fund would determine the extent to which it is affected by the pandemic and any of the impacts of the government's range of initiatives in response.
He says trustees find themselves having to reconsider the levels of liquidity they require, even if they hold enough liquidity to satisfy their regulatory requirements.
"If you're a fund or a trustee, you are investing for the long-term knowing that you don't need the liquidity until a member dies, retires or reaches another condition of release. So it's a 20, 30 or even 40 year relationship with your member," he pointed out.
"Although pandemics are one event that could happen, you've also got to say 'Well, what's the likelihood of that?'"
Insurance
Finally, KPMG highlights insurance in super as the third major issue facing the sector, referencing the issues posed by pandemic exclusions within group insurance policies which have recently caused a stir.
The firm says funds need to review and update their insurance offerings to ensure they meet the changing environment, taking into consideration pricing and member implications.
Mr Ryan says funds need to be wary of a significant increase in insurance queries, particularly around disability claims relating to mental health as the new reality of social distancing and self-isolation impacts workers.