investors cant expect automatic centrelink hel

Investors can't expect automatic Centrelink help


By staff writers and wires
NEWS.com.au
October 24, 2008 01:21pm
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What are these? Investors locked out of funds told to contact Centrelink

Won't qualify for payments automatically
"Callous" treatment, says Opposition


INVESTMENT management funds have frozen about $12 billion to curb a flight of cash to institutions covered by the Government's unlimited guarantee of bank deposits, the industry estimates.
The freeze by two-thirds of the nation's top 20 fund managers is not only affecting self-funded retirees and investors but also small businesses and developers, the Investment and Financial Services Association (IFSA) said.

The association held talks with government officials last night and is hoping to continue discussions today.

"The capital markets are looking for a signal here, so the Government needs to say something that's positive," association CEO Richard Gilbert told ABC Radio today.

"I think today is going to be critical."

The Government had discussed the detail of its guarantee package with the heads of the nation's four big banks last night, Mr Gilbert said.

"We're not quite sure what deal the banks have ... clearly we need some sort of deal ... because the asymmetry in the market is clearly obvious.

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NEWS.com.au, 24 Oct 2008 "We want a recognition that some of the funds have assets that are very similar to bank assets and we also want a recognition you can do something here."

Mr Gilbert says 13 of the nation's top 20 funds were now closed to redemptions.

"So we're probably talking ... about $12bn frozen."

The industry has suggested the Government consider a US-style opt-in guarantee scheme for which the funds would pay a premium.

"In the US they were able to do a special deal or package for the money market funds and we have put that to Government," Mr Gilbert said.

"Hopefully they will look at what happened over there, and the differences here and come up with something for here."

Mr Gilbert warned investors were not the only people affected by the freeze.

"It's the recipients of the capital. This capital is for small business, it's for people to do development projects, it provides jobs and employment and it provides liquidity in the economy to keep growth going.

Meanwhile cash-strapped investors who heed the advice of Treasurer Wayne Swan should not expect automatic support from Centrelink, its general manager says.

Mr Swan has told tens of thousands of Australians, many of them retirees, who are unable to access their capital from frozen investment funds to go to Centrelink to see if they are eligible for support.

A number of funds have suspended redemptions after the federal government's bank deposit guarantee scheme prompted an exodus of funds across the wealth management industry.

Don't just Swan in

Centrelink was monitoring the situation, its general manager Hank Jongen said today.

"Under the over-arching principles under which we make payments, there is an expectation that people draw on their own resources before Centrelink kicks in," he said on Fairfax Radio.

In extreme hardship people could expect help straight away, he said.

"The key here is to talk to us, explain your situation.

"If you are going to talk to us, it is really important that you check the status of your investment before contacting us so that we have a clear picture of where you have some capability of drawing income if that exists.

"If it doesn't we will talk to you about your individual situation."

Additional exemptions from the assets test hardship provisions would require a ministerial determination, Mr Jongen said.

"We provide emergency payments for people in extreme situations and we would look at what options are available.

"There is not a huge number of people affected by this but obviously we are concerned to provide support to the extent we can."

Opposition treasury spokeswoman Julie Bishop said that people turning up to Centrelink for help had been turned away.

She labelled Mr Swan's comments "arrogant" and "callous".

"People who are in dire need are approaching Centrelink for help only to be told they're not eligible for support," she said on ABC Radio today.

AXA Asia Pacific and Perpetual have frozen redemptions in $4.1 billion of investors' funds, joining Challenger Howard, the country's biggest mortgage fund, which froze $2.8 billion of redemptions earlier this week.

The move means that instead of regular weekly payments from the funds, investors will receive payment quarterly, or even not at all.

Federal Opposition Leader Malcolm Turnbull called on the Government to set an immediate cap on the unlimited bank deposit scheme, to stop money streaming into the guaranteed banks.

"Today, in probably Mr Swan's most inept performance of all, when confronted by the tragedy of people whose life savings have been frozen, the best he could suggest is that they could go down to Centrelink,'' Mr Turnbull said.

"It is a contemptuous comment, it just shows how out of touch he is.''

Seniors Australia said retirees with investments in the frozen funds should try to remain calm.

They will continue to receive their other regular income streams, even though they can't access deposits in the funds, it said.

"What were seeing is sentiment-driven alarm,'' Seniors Australia chief executive Michael O'Neill said.

"At this point, it's vital to hold steady and have faith that the national government will soon provide an effective policy response.''

Mr Swan and Prime Minister Kevin Rudd are meeting with the big banks today to discuss the credit crisis.
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