The Federal Government has been accused of under-shooting the reality of hardship early release superannuation drawdowns by more than 150% and relying on people accessing their own superannuation money rather than putting in place other support measures.
Industry funds have said the Government is relying on superannuation early release as an income support system that in reality was very expensive for the individuals concerned and cheap for the Government.
“It should be the other way around,” the industry funds said.
The accusation from industry funds has come at the same time as Federal Government minister and backbenchers have pointed to statements by the Prime Minister, Scott Morrison, that superannuation is members’ money and should be accessible for use by members facing extreme circumstances.
However, Australian Institute of Superannuation Trustees (AIST) chief executive, Eva Scheerlinck said the initial government estimates of $27 billion of super being accessed had now been increased by more than 150% “which indicates that too many working Australians are in financial distress and unable to access sufficient government support”.
She said that revised Federal Government forecasts that more than $42 billion of super could be withdrawn through its COVID-19 early release scheme pointed to the need for more government support measures for those suffering financial hardship,.
“The fact that so many Australians are expected to access their super suggests that there are cohorts of people in desperate financial need who are missing out on government support measures such as JobKeeper,” Scheerlinck said.
She said withdrawals to date – which amounted to super worth nearly $30 billion – would have long-lasting consequences for low income earners and women, in particular.
“We understand that a great many Australians have had no choice but to rely on their super to get them through the COVID-19 crisis, but the harsh reality is that low income earners and women, who were already facing a retirement savings shortfall, would be hit hard by this scheme,” Scheerlinck said. “We know that many young women now have a zero balance in their super fund which will only exacerbate the gender super savings gap that sees many more women retire in poverty.”
She said the Government needed to consider alternative income support for people in financial need due to the COVID-19 crisis.
For a 25-year-old, the cost of accessing $20,000 in super could be upwards from $60,000 in retirement.
Scheerlinck said the legislated increase in the Superannuation Guarantee to 12% would be critical to help boost the retirement savings of working Australians who had accessed super through the COVID-19 scheme. The Government should also be considering targeted policy measures to help address the COVID-19 super gap, she added.