Hundreds of thousands of young Australians have wiped out their retirement balances under the government’s early release of super scheme, according to Industry Super Australia (ISA).
In a new analysis of the early release scheme released today, ISA said it estimated 395,000 people aged under 35 had eroded their superannuation balances, justifying fears the scheme could lead to a future generation left languishing on the pension.
“ISA estimates that about 480,000 Australians across all age groups could have wiped out their super, even before the second tranche opens,” it said. “In March the government broke open super’s preservation rules and allowed Australians who had lost their jobs or had hours reduced to access $10,000 in super and a further $10,000 from 1 July.”
ISA said that it had initiated the research following “calls from a noisy group of backbench MPs to dump the incremental and legislated increase to the super rate from 9.5 per cent to 12 per cent by 2025”.
“But if those MPs get their way more workers would be more reliant on the aged pension - a bill everyone pays through higher taxes,” ISA said.
ISA said its analysis was based on ATO data on the proportions by age of those with accounts below $10,000, and Treasury statistics on the age distribution of early release. Estimates have been updated to the 14 June APRA totals.
“On average about 15% of Australian workers have accessed their super early. Three states were above the national average - Queensland at 20%, Northern Territory 19% and Western Australia 16%.
ISA said industry Funds had supported this scheme’s intent to get cash to those in dire financial need and had already helped more than 1.4 million Australians tap into their super but noted there had been “troubling reports of super being used to gamble, buy alcohol or other types of discretionary spending”.
“As the second tranche of the early release scheme opens ISA is renewing calls for members to only access their super as a last resort. A 25-year-old taking out $10,000 now could have $49,000 less in retirement, a 35-year-old could have lost up to $34,000 and a 45-year-old up to $23,000.”
“The government estimated 1.65 million would take out $27 billion from super, but already 2.1 million have taken out at least $15 billion and it appears likely demand will far surpass forecasts. Despite the greater numbers, Industry Funds have prepared to deal with the demands of this scheme.”
“The Prime Minister and Treasurer must stick by their promise to increase the super rate because its critical to helping these people rebuild savings they’ve wiped out, and avoid tax hikes on working people to prop up more people drawing a full pension.”