A review of the rules surrounding the early release of superannuation has raised questions about whether the definition of “compassionate grounds” is being stretched, with a vendor that helps people access their retirement funds attracting particular scrutiny.
SuperCare, which markets itself as the only company that assists with applications for access to superannuation on medical grounds, suggests its clients are better off using the money now. However, critics of SuperCare and the early release of super are concerned Australians’ savings are being used for non-essential purposes.
Late last year, Minister of Revenue and Financial Services, Kelly O’Dwyer, announced a review examining the increasing number of people accessing their superannuation to pay for bariatric (weight loss) surgery and in vitro fertilisation, and questioned whether the early-release conditions were fit for purpose.
Professional Planner covered the announcement here, and our subsequent reporting showed how much financial planners and their associations opposed the trend. Advisers’ concerns centre on the lack of financial advice being given to people accessing their super for treatment, and the effect of these withdrawals on retirement savings.
The Self-managed Superannuation Fund Association has been amongst the most vocal critics, and last week called on Treasury to toughen conditions for early release, particularly around compassionate grounds for medical reasons. The association’s chief executive, John Maroney, pointed out in a statement that a large portion of access to super on medical grounds was due to weight-loss surgery. This “strongly suggests the yardstick for genuine hardship” is not being met, the association’s release stated.
“There has to be an appropriate balance between the primary objective of superannuation – meeting people’s retirement income needs – and having early access to benefits because individuals have no financial capacity outside of superannuation to meet an expense incurred due to genuine hardship,” Maroney states in the release. “It’s the association’s belief that current use of superannuation for most medical treatments is not meeting this criterion.”
A similar view comes from Peter Foley, director of Thirdview Financial Planning, who says, “It’s an interesting term, ‘compassionate grounds’. Once you start creating exceptions, it’s a slippery slope. The term should be narrow and clearly defined.”
Foley believes super “should be sacrosanct”. He acknowledges that there are people who genuinely need to access super on compassionate grounds, but says many are being short-sighted and using it as a loophole, instead of as a last resort.
“I do have compassion for people wanting to fund these surgeries,” he says. “However, super is not the right funding mechanism and that is not the design of the policy.
“I think it’s human nature for people to be short-termist and to perceive the problem that’s immediately in front of them, without seeing the long-term financial implications.”
Foley’s view on SuperCare is that any scrutiny of a company commercialising the service of helping people gain access to superannuation is warranted.
“It’s rightly perceived that a company that is enabling people to make applications for early release of super should be appropriately scrutinised, as they are dealing with the long-term financial welfare of people,” he argues. “They may not be dealing in financial products, but there are real financial consequences to what they’re doing.”
Strong opinions
The director of SuperCare, Zain Merhebe, says he doesn’t care what advisers think about him, and that the press is painting his company negatively.
“I understand that what we’re doing paints this picture of vultures preying on people to access their super,” says Merhebe, who founded the company more than 10 years ago. “But honestly, it doesn’t faze me. We’re not doing anything unethical, and every time an article is written or we’re mentioned on television, we get inundated with phone calls [from potential clients].
“Our clients come to us from clinics after being referred by a specialist. They can apply for access to their super themselves, but if they have trouble, they can come through us.” The SuperCare service agreement states that clients must pay an application fee of $680 and may be charged a re-lodgement fee of $280.
“I built the company because doctors and specialists got sick and tired of doing the paperwork for the clients. The whole process can be quite lengthy, so we simply help people fill the applications to streamline it.”
Criticising SuperCare, he says, is the easy way out, and fails to take into account the broader needs of the people the company is trying to help.
“I’m just so sick of people trying to make headlines by saying you can’t access your retirement,” he says. “What’s the point of making extra money in super if you’re not going to be alive to enjoy it? What’s the point of having $600,000 in your super if you’re not going to have any children to leave it to?”
The last resort
Once a client is referred to SuperCare by a medical specialist, Merhebe says, the company asks if all other options have been exhausted, including ready cash, overdrafts and loans.
On its website, the company does recommend clients seek professional financial advice, and the client declaration in its service agreement includes a sign-off that SuperCare “are not accountants or financial advisers, so they did not and cannot give me any tax or financial advice”.
Despite Merhebe explaining that “we advocate people speaking to their accountant or adviser”, he is skeptical about the options advisers might provide.
“Advisers and accountants are only going to tell people to get loans,” he says. “If I go to a planner and say, ‘Hey, I need $30,000 for bariatric surgery, what should I do?’, they’ll tell me to get a loan for $30,000 at 15 per cent. So now I’m paying back $55,000, which puts me in financial hardship.”
The motives of advisers, he says, are also commercial.
“They’re just making a lot of noise and barking because money is coming out of super.”
A conversation piece
Merhebe is adamant that bariatric surgery, which constitutes the majority of access for medical grounds, saves the nation money by lowering obesity rates.
He also says there is much more access to superannuation via financial hardship than for medical procedures.
“But I can tell you so many stories,” he says, “about people whose life has changed after we’ve helped them access their super.”
Ultimately, Merhebe believes the stories of people who have no other options and need help applying to access their own money validate his business. He says that, technically, SuperCare is only helping people navigate a process that is mandated by legislation.
“If we didn’t charge a fee, we’d be the most beautiful company in the world. It’s only because we’re charged a fee that we’re set upon.”
