The Actuaries Institute has estimated that short-term demand from people financially impacted by COVID-19 for early access to their superannuation might exceed $25 billion, seriously impacting insurance in super and retirement savings.
According to the new rules announced earlier this week by the government, workers affected by the crisis would be allowed to pull in two tranches as much as $20,000 out of their super. The institute said that given 1.35 million working Australians each accessed the full amount of $20,000, the total number of withdrawals could exceed short-term $25 billion and therefore it called on the Australian Taxation Office (ATO) to help smooth the process.
"There may be a need for the funds and the Government to look at ways to enable early access and smooth out the ability and capacity of funds to pay," the convenor of the Actuaries Institute's superannuation practice committee, Tim Jenkins, said.
Among other measures, the ATO could also distribute the payments to further streamline the process to get money into the hands of those in need quickly and could then invoice the superannuation funds over the following few months to spread the cash flow impact on funds, Jenkins noted.
Actuaries Institute chief executive Elayne Grace said: "Some of the key issues include liquidity for funds, locking in losses for individual investors before investments have time to recover, and also, if superannuation balances fall to zero, there are issues around insurance.
“We know large parts of the community have insurance through their super fund. We want people to have access to their funds, to help them through very difficult times, but it is important to know and map the consequences.”