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What does liquidity mean for super?

Have you been hearing about liquidity in the media and wondered what it means for super? Our team explains what liquidity is and why it can be important.

       Written by Tamikah Bretzke
Colonial First State
   

Recently, there has been some media coverage surrounding the ‘liquidity’ of super funds and their ability to support the Australian Government’s early access to super initiative, which was designed to help support members financially impacted by Coronavirus. Understandably, this may have caused some questions from members about what this might mean for their super.

What does ‘liquidity’ mean?

In the financial world, the term liquidity refers to how easily an investment or product can be turned into cash. So for superannuation, liquidity can refer to how much cash a super fund holds, or how easily a super fund’s investments can be converted (or sold) into cash.

 

Generally speaking, the more liquid an investment is, the easier and faster it is to buy and sell. For example, shares are considered highly liquid as they are frequently bought and sold on share markets. However, direct investments in property or infrastructure are considered less liquid because of the time and difficulty often associated with buying and selling them for a given price. 

 

What role does liquidity play in a super fund?

Liquidity can be important for super funds for several reasons, including:

  • Helping to fund and take advantage of investment opportunities for the benefit of members 
  • Providing flexibility for making changes to investments as market conditions change
  • Helping the fund ensure cash is available for day-to-day operations – including transfers for members changing funds, for payments to members of account-based pensions and, of more relevance, to ensure the necessary cash is available for members to draw on as part of the government’s early access to super scheme.

How is Colonial First State placed to support members?

Colonial First State offers a range of options to help Australians with their super, investment and retirement needs – all of which are managed by skilled investment specialists.

 

As a member, you can feel confident knowing that our funds have the liquidity necessary for helping eligible members access their super during this uncertain time. You can also feel confident knowing that as developments continue to unfold, we will remain in close communication with our investment specialists to carefully review market conditions and closely monitor the liquidity of our investments – not only ensuring our funds are well-placed to meet their regular requirements, but also allowing us to prepare for and respond to changing market and economic conditions.

More information

We’re dedicated to supporting our members – both in growing wealth for retirement, and in providing them with the knowledge and tools necessary for making more informed decisions for their financial futures. Members can visit our website for timely market updates and education resources to help further their financial understanding and navigate the current climate.

Disclaimer

Information on this webpage is provided by Avanteos Investments Limited ABN 20 096 259 979, AFSL 245531 (AIL) and Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (CFSIL). It may include general advice but does not consider your individual objectives, financial situation, needs or tax circumstances. You can find the Target Market Determinations (TMD) for our financial products at www.cfs.com.au/tmd, which include a description of who a financial product might suit. You should read the Financial Services Guide (FSG) available online for information about our services. This information is based on current requirements and laws as at the date of publication.

Tax considerations are general and based on present tax laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information.

AIL and CFSIL are not registered tax (financial) advisers under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise under a tax law.