Ross Greenwood speaks to Australian Institute of Superannuation Trustees CEO Eva Scheerlink after a Sydney man is facing three years in jail after pleading guilty to arranging the early release of superannuation funds.
Ross Greenwood: Great to have your company here on Money News going right around Australia. Look, I did note earlier, the warning out there, it is a public warning still. You got to be very careful of people who claim that they can get your money out of your superannuation fund early. Now we do recognize that as people get older or indeed they get desperate, that a pot of money sitting there with tens and tens of thousands of dollars in it, is tempting to try and access to solve your financial problems.
I also recognize that even for young home buyers, it might be- well, shall I say tempting to try and get access to that super to try and get yourself set in the housing markets.
You’ve got to understand that there is a significant degree of risk if you seek to access your superannuation fund. Indeed, many who will try and claim that they can get that money, out maybe operating outside of the law.
Now one example of that is a 51-year-old man, Kent Nguyen who was found to have unlawfully created, operated and benefited from a fraudulent self-managed superannuation fund. Effectively it was an illegal early release of superannuation scheme. He pleaded guilty in the Downing Center District Court in New South Wales and was sentenced to three years jail after having pled guilty.
Eva Schilling, who is with the Australian Institute of Superannuation Trustees, has been warning about this for sometime. Because do bear in mind if you are also a trustee of a superannuation fund you have legal obligations and responsibilities be it a self-managed superannuation fund, or indeed if you are a superannuation trustee over other people’s money as well. She’s online right now. Eva, many thanks for your time.
Interview with: Eva Scheerlink, CEO, Australian Institute of Superannuation Trustees
Eva Scheerlink: No worries. Nice to talk to you Ross.
Ross Greenwood: This is something where the Tax Office is cracking down. I mean, to my mind, at least anyway, this is really long overdue. Obviously, in the heads off, seen the offers around the place, “Come to us, we can get your money out of the super fund early. We can do a range of different things.” To me, those promises always seemed: A, dubious, and B, questionable in terms of their legality.
Eva Scheerlink: Yes, that’s right. I’m so glad you’re talking about this today. For two reasons, I think it sends a really clear message to those shonky operators out there, who are selling the snakeskin or if you like to try and say, “I can get your money out early.” Also those people that might be thinking, as you say that are tempted by that pot of money that they’ve got there their retirement saving to access it early. Superannuation is for your retirement. It shouldn’t be accessed early for any reason other than legal reasons like financial hardship or compassionate grounds.
Ross Greenwood: In this regard, you’ve made submissions to a range of inquiries. You’ve certainly noted the growth in this questionable industry about the early release of superannuation. The problem is even when people might have even justifiable claims, some of those schemes are attempting and they’ve very high fees. Fees that the people might not otherwise have to pay.
Eva Scheerlink: Yes, that’s right. The superannuation money, the reason it’s locked up is it’s compulsory forced to retirement savings, right. Trying to protect us from ourselves. Australians are not very good savers. If we didn’t lock the money away like that, we probably wouldn’t have a lot for a rainy day when it comes to our time after we stop working. We’re obviously living a lot longer, so the money’s got to last longer. It’s important that the rules around accessing your superannuation are very strict.
Ross Greenwood: Okay. Eva, just explain the process. Now having been a trustee of a superannuation fund, I’ve got some idea as to what the process is behind the scenes. Just explain to people what happens when somebody makes an application to a superannuation fund for early release of the superannuation on the grounds that they are really, again, with a severe disability perhaps, or indeed that they’re very much at the end of their working life.
Eva Scheerlink: Yes. It’s called a condition of release, when the super fund is allowed to give you access to your superannuation. Which means that you have between the ages of 55 and 60. Depending on how old you are there’s a sliding scale and you have stopped full-time work, you can access your super because you’re retired. You can also sometimes access your superannuation when you’ve got a total permanent disability like when you are terminally ill.
You got to remember too that in those circumstances there might be insurance in your super. The only way that you can access your superannuation at any circumstance, is if you can prove that you are suffering from financial hardship. You have to be able to show that you cannot pay your bills. You have to, in that case, submit your bank statements for example that shows where your money is going. You also have to be on center link payments for a minimum of six months at that point. [crosstalk]
Ross Greenwood: Okay, just one question about that Eva. I was going to ask you about that. At that point let’s say, for example, you have complied with all those things you’ve spoken about, who makes the final decision? Is it the trustees of the superannuation fund or is it say, for example, a tax officer makes that decision?
Eva Scheerlink: In relation to financial hardship, I think it’s now the Tax Office. It used to be the Department of Human Services, so it’s now the Tax Office. It’s a maximum of $10,000 Ross. If you’ve got $100,000, there’s certainly no way you can access the entire pot.
Ross Greenwood: That’s interesting to note as well. All right, I want to take you to Leslie, who’s in Sans Souci.She’s rung up, so this is not setup for you, Eva. I think it will be an interesting thing just to hear what goes on in the real world though. Leslie, thanks for your call. Just explain your situation.
Leslie: Hi, Ross. Can you hear me okay? I’m driving–
Ross Greenwood: Loud and clear I can Leslie. No problems at all.
Leslie: Okay, great. My husband was diagnosed with dementia at 54. He’s now 56. The preservation age for him is 59, I believe. I’m the breadwinner. I’m the carer. He has a substantial NDIS package, so he gets care through that. While I’m at work someone else is caring for him.
We’ve been trying to access his super, which apparently we can– and I am dealing with a financial adviser, who obviously charges- that cost me a lot of money that I’ve got to find, but he’s terrific. At the moment we’re trying to get David’s super. They’re saying that, unless we can prove that he will be deceased within 24 months, then there are three components to check that we have to pay on that amount. That means we’ll lose pretty much half of his super.
Now he’s seeing three neurologist through the time that David’s been diagnosed, and not one of them can give me any indication as to whether he’ll be alive in 12 months to 12 years. When they said terminal illness, they don’t mean a terminal illness, they mean terminal illness that will end the life within 24 months.
Ross Greenwood: It’s interesting also, and of course, what you’re saying Leslie, is your husband has got no way in the future of earning an income. He is really at the end of his working life. The question now is just his ability to be able to get this access to the superannuation, it would help your welfare, his welfare in regards to it. I’ll go back to where Eva is. Eva Schilling from the Australian Institute of Superannuation Trustees, you’ve heard that real-life story from Leslie. This is the problem of this, the rules are those spelled out a quite clear cut. From a point of view of an individual going through this, it can be frustrating or quite difficult in being able and try to access that money from superannuation.
Eva Scheerlink: Yes, that’s right. Leslie is absolutely right. It’s anticipated that the person will die within 24 months to get the early release. When the system was first designed, if you think that 30 years, we really weren’t thinking about dementia in the mainstream very much as a terminal illness. We were thinking about things like cancer. Maybe there is a need for us to really relook at what some of these roles are in superannuation for people who really need access to the money early. I don’t know whether or not in Leslie’s case they might be some total and permanent disability insurance there they might be able to access, if they can get access to the superannuation savings themselves.
Ross Greenwood: I’ll tell you what we’ll do. We’ll keep Leslie’s detail and we’re going to get more detail from you about that Leslie, because my sense about this is that there might some other ways in which people might be able to help, even though that will also put her thinking cap on about that as well. In the meantime, you can see some of these early release of superannuation with very strict rules. Just be highly careful of them. They’re very expensive. In some ways, they are legally questionable and you’ve got to be able to protect yourself as well. Eva Schilling from the Australian Institute of Superannuation Trustees. Many thanks for your time.
Eva Scheerlink: Pleasure.
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