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Financial assistance to superannuation investors.



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C68/02

14 June 2002

Financial assistance to superannuation investors

The Minister for Revenue and Assistant Treasurer, Senator the Hon Helen Coonan today announced that she has decided to provide a grant of financial assistance to certain superannuation funds which were formerly under the trusteeship of Commercial Nominees of Australia Limited (CNAL).

Under Part 23 of the Superannuation Industry (Supervision) Act 1993 (SIS Act), the Minister has made a decision to grant financial assistance to 181 small superannuation funds that suffered losses in the Enhanced Cash Management Trust (ECMT). These applications are the first batch relating to the ECMT to be submitted by Oak Breeze, the replacement trustee.

"Based on the 181 applications and additional information received from the trustee on behalf of these funds affected by losses in the ECMT, advice from the Australian Prudential Regulation Authority and the Treasury, I am satisfied that the 181 funds have suffered an eligible loss under the Act," Senator Coonan said.

"I have found that the losses to these funds from their exposure to the ECMT have arisen as a consequence of fraudulent conduct or theft.

"The fees charged by the acting trustee Oak Breeze, which stepped in after the collapse of CNAL, arose from the need to reconstruct the accounts as a consequence of that fraudulent conduct or theft.

"These losses led to a substantial diminution in each fund leading to the difficulty in the payment of benefits to the members of these funds, some of whom have lost a significant proportion of their retirement savings."

Senator Coonan said that in principle, the public interest required that a grant of financial assistance be made to the 181 funds involved in respect to their losses and in respect of all the fees charged by the replacement trustees.

Hypothetical investment returns that might have been earned on the balances in the ECMT since the ECMT was frozen in November 2000 will not be included in the grant of financial assistance as it is not Government policy to underwrite superannuation fund investment returns.

Senator Coonan also announced that the Government would increase the proportion of the losses that would be paid in financial assistance to these funds.

"Previous Government policy from the 1997 Financial Sector Inquiry was that only 80 per cent of any losses under Part 23 be paid," Senator Coonan said.

"I am pleased to announce that the Government has agreed to increase that proportion to 90 per cent of the eligible loss.

"This change ensures that the policy is consistent with other policies in this area, including the HIH Assistance Scheme which generally pays out 90 per cent of the assessed claim."

The final grant determinations will be made in respect of each fund in coming weeks once the conditions on which a grant is to be paid are settled (the SIS Act provides that certain conditions must be included) and all administrative issues are finalised.

"I am well aware of the impact on many Australians as a result of the failure of Commercial Nominees and would like to reassure those fund members who have suffered that I will move as quickly as possible to finalise these

determinations," Senator Coonan said.

Superannuation funds have indicated their willingness to be levied to pay for the grants of financial assistance to be provided to those funds who have suffered and the details of such a levy will be decided by the Government in consultation with the industry.

Fund members can obtain further information on the status of the determinations by contacting the acting trustee, Oak Breeze on 1800 003 306.

© Commonwealth of Australia 2000