Insurance

With the natural disaster that has happened in Queensland, Victoria and northern Western Australia, the amount of stress and the need for money to rebuild damaged homes or buy the necessities of life are ever more critical and urgent.

However, early access to superannuation is more of a "medium-term assistance" measure as people need to demonstrate they are in longer-term distress including, for example, has been on Centrelink benefits for 26 weeks. At this early stage of the flood disaster, it is unlikely that people will meet some of the longer-term criteria for the early release of superannuation.

What The SISR Rules Says

A member's benefit may only be cashed in accordance with division 6.3 of the SISR -
a. Retirement;
b. Death;
c. Temporary or permanent disability;
d. severe financial hardship;
e. approval from APRA;
f. compassionate grounds;
g. temporary resident's permanent departure overseas;
h. member over 55 transition to retirement pensions.

In Simple English
Based on the above criteria, the most relevant section would be "d. severe financial hardship". However, to demonstrate "severe financial hardship", members and or trustees of a super fund must have at a minimum received Commonwealth support payments, such as unemployment benefits, continuous for a period of 26 weeks, and is unable to meet reasonable and immediate family living expenses, including mortgage repayment.

Both "e & f" are criteria designed to allow judgment in really extreme and severe circumstances. Yesterday evening, Assistance Treasurer Bill Shorten has ruled out the exercise of the above two judgment, as there are many government programs out there currently that are designed to provide assistance for immediate and short term. Members who are in distress because of the recent floods should first access government assistance packages and any insurance cover, including that offered by their super funds. Such government assistance programs are designed to provide immediate assistance. Early access to super is more of a medium to longer term assistance measure.

Where Then Can We Get Money
Money can be released in any of the following sources:
1. Access your home flood insurance if there is one;
2. Release for mortgage repayments in extreme circumstances but again the conditions are very restrictive. Currently all the major banks are offering emergency relief to flood victims - including allowing them to defer mortgage repayments for three months, restructure business loans, and delay credit card payments without incurring penalties;
3. Borrow from family members and friends;
4. Sale of assets. May it be saving deposits, term deposits or investment assets (ie, listed shares) or an extra car or a property. Realizing assets at this time would help meet the immediate family needs;
5. For members whose super fund has insurance policies, check with your financial planner on the type of coverage the insurance policies are for;

In Simple English Continue....
In order to gain access to super fund under extreme circumstances (again the conditions are very restrictive), people must get permission from the Australian Prudential Regulatory Authority ("APRA") and from their super fund to withdraw money on these grounds. APRA will only allow people to access money to cover a mortgage if the loan payment is overdue and the lender has written that it plans to foreclose.

What The Officials & Experts Say
In the medium term (in a couple of months time) it is predicted that some scheme members would be able to apply for early access to their super over the medium term if they have been out of work for a long time or if they encountered severe difficulties with mortgage repayments. The Assistant Treasurer's department said that experience from other disasters, such as the Victorian bushfires, was that only very limited early access to super was granted, as other forms of assistance were more appropriate at this time.