1 million young workers drain their super account

Nearly one million superannuation members under the age of 35 have closed or have less than $1,000 in their super account as a result of the COVID-19 early release scheme, according to the Australian Institute of Superannuation Trustees (AIST).

Another 73,000 people, AIST said, lost insurance cover that was linked to their super account.

AIST chief executive, Eva Scheerlinck, said the long-term impacts of the pandemic on retirement savings was still uncertain and evidence showed that the financial burden of lost retirement savings would most heavily impact those who were least able to afford it.

She noted that those who had access their super early would find it difficult to make up the lost ground in their savings without targeted policy intervention.

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AIST recommended a one-off Government contribution to the super accounts of low-income earners who accessed their super early and met the eligibility criteria. The contribution would be based on the proportion of balance withdrawn and no more than $5,000.

“Addressing the COVID-19 super gap will not only ensure Australians aren’t penalised in retirement for an economic downturn driven by a health crisis that they had no control over, it will also reduce the extent to which they are required to rely on the taxpayer-funded age pension in retirement,” Scheerlinck said. 

AIST also said it urged the Government to resist pressure from back benchers and stick to the legislated timeline to increase the compulsory super rate to 12% by 2025 which it said was vital for low income earners to achieve financial security in retirement.