MNI INTERVIEW2: Covid Exposes Aussie Pensions' 'Systemic Risk'

--Covid-19 Has Highlight Inherent Risk In May Super Funds: Minister

By Lachlan Colquhoun

     SYDNEY (MNI) - In-built "systemic risk" in many of Australia's

superannuation funds has been exposed by the Covid-19 pandemic, according to

Assistant Minister for Superannuation Jane Hume, but she told MNI that the

AUD2.7 trillion retirement savings industry would be left to solve its own

problems without further regulation .

     The government has no agenda to "mould or shape" the superannuation

industry, beyond making it more efficient, Hume said in an interview: "We don't

have an ideal model in mind, it should be driven by the market."

     With Australians able to withdraw up to AUD20,000 from their retirement

savings if they face hardship resulting from the coronavirus pandemic, the

narrow membership profile of some funds has made them vulnerable to cash

drawdowns by policy holders in the worst hit sectors of the economy, Hume said.

     --WEAKNESS

     "If you have all your members in the same cohort that is a risk that is

hiding in plain sight," Hume said, pointing to the union movement origins of

many Australian superannuation funds.

     "This is a genuine structural weakness that has been hiding for a long

time," she said.

     Hume said market momentum was towards fund consolidation and mergers, but

she warned against a tendency to "merge with like brethren" into funds where

membership was dominated by particular professions.

     "This doubles down on the same risks," she said.

     --EMPLOYER COSTS

     Hume said the government was committed to implementing legislated changes

which would increase mandatory employer contributions from the current 9.5% up

to 12% of wages.

     She noted that a number of organisations, across the business spectrum, had

warned that this would impact on wage growth but confirmed there would be no

change in government policy.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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