Frozen managed fund? Help is here!
As the global pandemic continues to affect the economy, some managed funds facing liquidity or other operational issues have frozen withdrawals ostensibly to protect the best interests of members. However, members whose investments have been frozen and are facing hardship have been thrown a lifeline by ASIC with the registration of an instrument and implementation of individual hardship relief measures and rolling withdrawal relief. These hardship relief measures may provide members with up to 4 withdrawals per financial year up to $100,000 in total.
With the COVID-19 pandemic affecting all aspects of the economy, it is not surprising that some managed funds have suspended or cancelled the ability of investors to withdrawal their money. Broadly, managed funds include any fund in which the money you invest is pooled together with other investors. The fund manager or responsible entity then uses the pooled money to buy and sell assets (including shares or bonds) on your behalf.
In some situations, these managed funds may face liquidity or other operational issues due to an external event such as a global pandemic or other factors which may require freezing of withdrawals to protect the best interest of members. However, in the context of a global pandemic there may be members facing hardship and require the withdrawal of their investment to be able to survive.
To enable some frozen funds to provide hardship relief to their members or investors, ASIC has registered a relevant instrument and implemented individual hardship relief measures as well as rolling withdrawal relief. The hardship relief is available to both liquid and illiquid frozen funds. To be eligible for the relief, the responsible entity of the managed fund must have suspended or cancelled withdrawals, and ceased to allow the issue of new interests in the scheme (including distribution reinvestments and issues to existing members).
ASIC notes the purpose of the hardship relief is to ease the statutory restrictions placed on responsible entities and help members suffering hardship withdraw from a frozen fund, while balancing the interests of remaining members.
If you’re a member of one of these frozen funds, you may be able to access up to $100,000 of your money per calendar year if you meet the following conditions:
- urgent financial hardship – member requires the amount requested to meet reasonable and immediate living expenses for themselves or their dependants.
- unemployment – member has not been in gainful employment for at least 3 months and has no other means of financial support (except government assistance eg unemployment benefits including the JobSeeker).
- compassionate grounds – member or their dependent needs the amount requested to pay for:
- medical costs including related transport, a medical practitioner must provide a certified statement confirming the medical condition;
- specific modifications to a principal place of residence or vehicle to accommodate a severe disability;
- funeral expenses and other expenses related to death;
- the member caring for another person who is dying from a terminal illness;
- their mortgage to prevent the selling their principal place of residence; or
- a binding financial obligation entered into by the member before the responsible entity suspended withdrawals.
- permanent incapacity – member has ceased gainful employment due to mental or physical ill health and are unlikely to ever again commence the type of employment for which they are reasonably qualified by education, training or experience.
The $100,000 need not be withdrawn at the same time, members may be allowed up to 4 hardships withdrawals per calendar year. If you’re a member of a frozen fund you should contact the fund if you meet one of the hardship criteria and require money. Remember, responsible entities and their officers owe duties to members of their managed funds including exercising powers to carry out duties in the best interests of members.