With 2.5 million Australians now having dipped into their super early since mid-March, real questions are being asked about the long-term public impacts of such a scheme.
A recently conducted financial modelling study estimates the early access to superannuation scheme which was brought in as a response to COVID-19 will end up costing Australia’s retirement system between $100 billion and $130 billion.
The figures are a worry as the scheme is well-intentioned but misguided policy from the start.
Not only does the scheme have a long-term impact of early super withdrawals for individuals who are using the scheme, but little thought has been given to what it will eventually cost the government in additional pension payments.
The true costs of allowing people to access their super early will ultimately be paid by future Australian governments and taxpayers.
He outlined that the $100 billion to $130 billion forecast represents a very significant future shortfall (which will only increase as further super is released early).
Superannuation withdrawn through the scheme was revealed to have already surpassed Treasury estimates, which has now been revised to $42 billion in early payments.
It is critical to examine what impact this policy will have on Australia’s retirement system, particularly after the recent decision by the government to extend the scheme to the end of the year as there is no doubt that extending the scheme would exacerbate the problem created by the government.
The Australian public will ultimately bear the cost, as those who have withdrawn super will be less able to fully fund their own retirement needs.
It’s not just the cost that is concerning – but also how the early access to super scheme undermines the importance of superannuation.
Australia is celebrated globally for its compulsory super system, which is often singled out as a success story.
We have the fourth-largest retirement savings pool in the world for what is globally a very small population. The reason why we punch above the rest of the world as a nation is because of that compulsory superannuation system.
Policy around early release of super flies in the face of this.
The fear is that going forward, our superannuation system will become a tempting target to be used by governments, present and future, as an ATM to withdraw money to plug holes in the economy.
Without proper governance, the early release policy has set a dangerous precedent.