Industry superannuation funds have urged the Government not to extend its hardship early release superannuation scheme beyond the end of December as new data has revealed the long-term impact of the COVID-19 pandemic and other measures on superannuation fund balances.
The data, from research house Dexx&r has revealed that superannuation fund members are facing long-term impacts to their balances, almost irrespective of whether they accessed the hardship early release regime.
Putting aside the impacts of early release, the Dexx&r research has pointed to the impact of a significant increase in unemployment and under-employment, minimal growth in wages and salaries over the next five years and depressed investment returns.
“The economic impact of the COVID-19 pandemic on Australia’s superannuation funds under management (FUM/A) held in accumulation phase accounts is projected to decrease by $347 billion in December 2020,” the Dexx&r analysis said.
“This equates to a 15.8% drop from $2.20 trillion in December 2019 to $1.85 trillion in December 2020,” The Dexx&R Market Projections Report said.
“Over the 10 years to 2029, COVID-19 impact is projected to reduce the total projected Superannuation Accumulation Phase FUM/A by $1.29 trillion to $2.46 trillion from the projected pre COVID June 2029 FUM/A of $3.75 trillion.”
The report said COVID-19 was expected to result in a significant increase in unemployment in the year to December 2020 and continuing through to at least December 2023, with a total of $11.3 billion in superannuation guarantee contributions being lost if unemployment remains at 10% till December 2021.”
Reacting to suggestions that the Government might further extend the hardship early release superannuation regime, Australian Institute of Superannuation Trustees chief executive, Eva Scheerlinck warned of the consequences.
“Extending the scheme beyond the end of the year will be of no benefit to the many thousands of young people and low income earners who depleted their super savings in the first tranche,” she said.
“The early release scheme has come at huge cost to retirement savings of low paid Australians at a time when it has never been cheaper for the Government to borrow money to provide income support to vulnerable Australians,” Scheerlinck said.
“We now have a generation of young Australians missing out on the benefit of super returns that average around 7% year, when the Government could be borrowing money at near zero interest rates to provide a similar, and more targeted, level of financial assistance to those in need.”
