Rest warns early super withdrawals could hinder infrastructure investment

The A$53bn industry fund says it may have to invest over shorter time horizons if the early withdrawal scheme is extended.

Australian superannuation fund Rest has warned that the country’s early super withdrawal scheme could hinder its ability to make long-term investments in infrastructure assets.

The fund announced that it has now paid out A$1.08 billion ($710 million; €648 million) under the early withdrawal scheme as of 21 May. The scheme was introduced by the federal government in April and allows members to withdraw up to A$10,000 before 30 June and another A$10,000 after that date if they have suffered financial hardship because of the covid-19 pandemic.

Data released by the Australian Prudential Regulation Authority this week showed that Rest, which has A$53 billion of assets under management and draws much of its membership from the hard-hit hospitality sector, was among the top four largest payers of early withdrawals, behind only AustralianSuper, Sunsuper and Hostplus.

Rest CEO Vicki Doyle cautioned against the early withdrawal scheme becoming a permanent feature of Australia’s superannuation landscape, arguing that superannuation has a “much larger role to play” in helping the economy.

“As a major investor with A$53 billion in funds under management, Rest is well placed to provide long-term capital investment into important community infrastructure and capital raisings that can generate returns for our members and support Australia’s economic recovery,” Doyle said.

“However, in order to invest in infrastructure and raise capital for Australian companies, it’s critical superfunds have stable policy settings. Uncertainty will constrain our ability to invest for the long term on behalf of our members.”

She said it was important that a “short-term approach to the current crisis does not create a longer-term crisis for Australia’s savings” and that the fund would have to invest on shorter time horizons if super accounts were regularly used to provide fiscal support to the economy.

Doyle said that Rest has around A$8 billion invested in infrastructure, which according to its latest annual report was split roughly 50/50 between funds managed by AMP Capital and its own management company. Rest is one of the 27 industry funds that owns a stake in IFM Investors.

Doyle added that the amount withdrawn so far has remained “significantly below” the fund’s forecasts and is comfortably within its provisioning.

“We are now typically receiving around 3,000 to 4,000 applications in each daily set from the Australian Taxation Office, and these continue to trend downward,” she said.

“We remain financially well placed should volumes increase as the scheme continues through to September.”