Forecasted $42 billion of early super withdrawals suggests greater government support is needed for those in financial stress
Revised Federal Government forecasts that more than $42 billion of super could be withdrawn through its Covid early release scheme points to the need for more government support measures for those suffering financial hardship, the Australian Institute of Superannuation Trustees (AIST) said today.
AIST CEO Eva Scheerlinck said the fact that so many Australians are expected to access their super suggested that there were cohorts of people in desperate financial need who were missing out on government support measures such as JobKeeper.
“Initial government estimates of $27 billion of super being accessed have 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.”
Ms Scheerlinck 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 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,” Ms 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.”
Ms Scheerlinck said the Government needed to consider alternative income support for people in financial need due to the Covid crisis.
For a 25 year old, the cost of accessing $20,000 in super could be upwards from $60,000 in retirement.
“The Covid early release scheme is an income-support system that is very expensive for individuals and cheap for the Government, when it really should be the other way around.
“With global interest rates close to zero, the Government is well positioned to borrow money that could be used to assist Australians who are struggling. Meanwhile ordinary workers are being forced to withdraw super savings that could be delivering them at least 5-7 per cent in annual interest over the long term.”
Ms 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 scheme. The Government should also be considering targeted policy measures to help address the Covid super gap, she added.
“It’s now more important than ever that we increase the compulsory super rate so that vulnerable Australians with insecure work and broken work patterns have the opportunity to retire in dignity.”
