Early access scheme impacted adequacy, sustainability, integrity

Poverty in retirement is a real possibility for millions of Australians given the early release of superannuation scheme and the country’s global ranking for retirement income adequacy, according to the Australian Institute of Superannuation Trustee (AIST).

AIST pointed to Mercer and CFA’s latest global pension index that saw Australia’s super system drop in its overall global ranking from third to fourth, and its retirement income adequacy ranking of 14^th.

AIST chief executive, Eva Scheerlinck, said: “Previous analysis by Mercer and AIST has shown that low paid, young Australians will bear the brunt of an estimated $100 billion shortfall in retirement savings due to the COVID-19 pandemic.

“The COVID-19 early release scheme unfortunately forced many people to choose between poverty now or poverty in retirement. This release from Mercer confirms that poverty in retirement is a real possibility for millions of Australians.”

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She called on the Government to address the gap in retirement savings created by the pandemic.

She said the report noted that countries that allowed temporary access to pension savings in response to the pandemic had materially impacted the adequacy, sustainability, and integrity of those pension systems.

“The long-term impact of this will mean older people, especially women, will need to work longer and have to settle for a lower standard of living in retirement,” Scheerlinck said.

AIST’s pre-Budget submission called on the Government to commit to the legislated increase of the superannuation guarantee rate to 12% and a one-off super contribution of up to $5000 for low income earners who were eligible to access the early release scheme.