Super fund flags withdrawal freeze

In a first for an industry superannuation fund, AustralianSuper is threatening to tweak the rules to stop members from withdrawing their savings from certain asset classes.

Fears of a plunge in commercial property values, here and abroad, prompted the nation’s largest super fund to consider the defensive action in a bid to protect itself from any possible crash.

In addition, AustralianSuper will no longer allow members to invest more than 70 per cent of their savings in its property options from 19 November.

The $140 billion fund has $1.7 billion of its members’ retirement savings invested in property.

Some 40,000 members flocked to move their savings into the fund’s property option over the past couple of years as capital values climbed strongly.

However, rising global interest rates, a tightening credit squeeze, and the likely economic shocks of the planned Brexit have pundits predicting that the value of commercial buildings will plummet at some point.

The Australian reported the fund would also block savings from being switched out of property options and stop any new contributions into the option for up to two years “in exceptional circumstances in response to a market stress event”.

During a freeze, investors will not be able to transfer their balance, make lump-sum withdrawals or receive an income from funds invested in the property option, the newspaper reported.

AustralianSuper group executive Paul Schroder said the changes were being made to “manage risk and protect all members’ interests” after consulting members.

“This is a prudent step designed to ensure all members can continue to exercise investment choice over the long term and in all market conditions,” Mr Schroder said.

“The fund is committed to the property option, but these changes were necessary to ensure other members are not disadvantaged in the event of a significant property market correction in the future.”

In a policy update, the super fund’s members were told: “Direct property assets can’t be easily bought and sold at short notice. If the market experiences a stress event, which causes lots of investors to sell property assets at the same time, or makes it more difficult for investors to finance transactions, we may not be able to find willing buyers at reasonable prices. Having the ability to freeze the option provides a safeguard by allowing some time for the market to recover before selling property assets.”

Did you move your savings or investments into property assets to take advantage of growing capital values? Are you likely to be affected by AustralianSuper’s rule change?

Written by Olga Galacho

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