Frozen funds and hardship withdrawals

This is Information Sheet 159 (INFO 159). It provides information for consumers about frozen funds and hardship withdrawals.

What is a frozen fund?

A frozen fund is a registered scheme where the responsible entity (also referred to as the fund manager) has suspended members’ (investors’) rights to redeem or withdraw their investments. Freezing a scheme is often a prudent measure to protect the interests of all members. It does not necessarily mean that the value of investments has decreased, members’ money has been lost or that distributions – such as income payments – have stopped.

A freeze on withdrawals can prevent assets from being sold at below market value in order to meet requests for withdrawals. By doing this, the responsible entity can help to ensure that all scheme members are treated fairly and that their capital is protected.

Responsible entities must notify members if their scheme is frozen.

Can I withdraw my money if my fund is frozen?

Contact your responsible entity directly to find out whether you can withdraw your money even though the scheme is frozen.

You may be able to withdraw your money if you are suffering financial hardship. Further information on how to make a hardship withdrawal request is set out below.

Requesting to withdraw on the grounds of financial hardship

The responsible entity of a frozen fund must notify ASIC if it intends to allow hardship withdrawals from the assets of the scheme. Frozen funds whose responsible entities have notified ASIC that they propose to offer hardship withdrawals are listed in the Appendices to Information Sheet 249 Frozen funds – Information for responsible entities (INFO 249).

To withdraw your money on the grounds of financial hardship, you will need to send a request to the responsible entity and demonstrate how you meet one of the hardship criteria below:

  • urgent financial hardship – if you are unable to meet reasonable and immediate living expenses for yourself or your dependants
  • unemployment – if you have not been employed for at least three months and have no other means of financial support (except government assistance)
  • compassionate grounds – you (or in some cases your dependants) require financial assistance to:
    • help pay medical costs required to treat a life-threatening illness or injury or to alleviate acute or chronic pain or an acute or chronic mental disturbance
    • pay for specific modifications to a principal place of residence or vehicle necessary to accommodate special needs arising from a severe disability
    • assist with funeral and other expenses related to your death or the death of one of your dependants
    • provide care for another person who is dying from a terminal illness, including home care
    • prevent a lender from selling your principal place of residence
    • meet certain binding financial obligations, and
  • permanent incapacity – if you are no longer employed due to mental or physical illness and are unlikely to recommence that employment

The responsible entity will then determine who meets the hardship criteria and how much money each investor can withdraw.

Members who meet the hardship criteria may, subject to the discretion of the responsible entity:

  • withdraw up to a total of $100,000 per calendar year, and
  • receive up to four hardship withdrawals per calendar year.

A responsible entity is not obliged to offer hardship withdrawals or grant a hardship withdrawal requested by a member. If a responsible entity elects to offer hardship withdrawals, it must comply with ASIC’s conditions and act in the best interests of its members at all times.

Withdrawing from a scheme that has become illiquid

Sometimes, a scheme may become illiquid, which means that 80% of its assets can no longer be sold at market value in a reasonable period. When this happens, the responsible entity may decide to make withdrawal offers (unrelated to hardship) to all members provided that the scheme has sufficient cash. This may include a ‘rolling withdrawal offer’, which involves periodic withdrawal offers to all members if certain conditions are met, including that the responsible entity has sought ASIC relief. If the responsible entity decides to make such offers, they will contact you.

Making a complaint

If you are not satisfied with your responsible entity’s decision, you should contact them in the first instance. They may be able to resolve your complaint through their internal dispute resolution (IDR) process.

Information on how to complain directly to a responsible entity can be found on their website or in the Product Disclosure Statement (PDS) provided to you.

If your responsible entity does not resolve your complaint satisfactorily, you may lodge a complaint with the Australian Financial Complaints Authority (AFCA) at no expense.

AFCA is a free, fair and independent dispute resolution scheme for financial services. AFCA is an alternative to tribunals and courts for resolving complaints consumers and small businesses have with their financial firms.

You can contact AFCA by phone on 1800 931 678 or by lodging your complaint through the AFCA website.

ASIC Information Sheet 174 Disputes with financial firms (INFO 174) has more information on how to complain about your responsible entity.

Members’ rights

The following options are available to members if they believe that their scheme is no longer performing as intended or if they are dissatisfied with the way the responsible entity is operating the scheme:

  • request a members’ meeting. Members collectively have the right to call meetings to consider resolutions in respect of the scheme and its management. Meetings can be held to consider a range of resolutions including amendments to the constitution, removal and replacement of the responsible entity and winding up of the scheme, and/or
  • apply for court orders. Individual members have ‘standing’ to approach the courts for a range of orders relating to the operation of the scheme, including injunctions, winding-up orders and orders for the appointment of temporary responsible entities.

For more information see INFO 249.

ASIC and frozen funds

ASIC does not determine who meets the hardship criteria nor issue hardship withdrawals from frozen funds. ASIC’s role is to:

  • modify the law when appropriate, to facilitate members’ access to their money, and
  • investigate complaints and allegations of unlawful activity against responsible entities.

ASIC does not give legal advice.

Where can I find more information?

Important notice

Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. We encourage you to seek your own professional advice to find out how the applicable laws apply to you, as it is your responsibility to determine your obligations.

You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases, your particular circumstances must be taken into account when determining how the law applies to you.

Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.

This information sheet was updated in March 2024.

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Last updated: 30/04/2024 12:10