Almost half a million superannuation funds have been raided – and completely emptied – under the government’s early release of superannuation scheme, new analysis reveals.
Around 480,000 Australians have eroded their entire superannuation balance, with around 395,000 of those under 35, Industry Super Australia (ISA) estimates.
And that’s before the second round of early super release opened on 1 July, with the analysis only updated to 14 June, according to ISA.
“Those early contributions are like yeast; without them you’re left with a much flatter nest egg,” ISA chief executive Bernie Dean said.
“To have hundreds of thousands wiping their savings out midway through their life is a tragedy waiting to happen and it will affect everyone.”
On average, around 15 per cent of Australian workers accessed their superannuation early, with the majority from Queensland, Northern Territory and Western Australia.
The second round of early release scheme opened on Wednesday, but ISA has urged Australians to only access their nest egg if they’re in dire straits.
“Every Australian deserves a good life in retirement, not just scraping by on the pension,” Dean said.
The association also reminded Aussies how much they stand to lose by delving into their superannuation early.
“A 25-year-old taking out $10,000 now could have $49,000 less in retirement, a 35-year-old could lose up to $34,000 and a 45-year-old up to $23,000,” ISA said in a statement.
ISA slammed backbench MPs for attempting to dump the increase of the super guarantee from 9.5 per cent to 12 per cent by 2025, with a scheduled increase to 10 per cent set to take place from 1 July 2021.
“If those MPs get their way, more workers would be more reliant on the aged pension – a bill everyone pays through higher taxes,” ISA stated.
“The Prime Minister and Treasurer must stick by their promise to increase the super rate because it’s 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,” Dean said.
It echoes calls from Australian Council of Trade Unions assistant secretary Scott Connolly earlier this week, who said the backbenchers needed “to be put in their place” by the government.
“Workers need to be given reassurance that their retirement savings will go up as currently legislated and people will not be forced to raid their retirements to pay for housing,” said Connolly.
Opponents like the Grattan Institute argue Australians could be $30,000 worse off if that planned increase went ahead, warning the policy would hurt Aussies during their working years.
The thinktank argued in a 2019 report that increases in super payments would cost wage growth, and for low-and-middle income earners, the increase in superannuation would be significantly offset by smaller pension payments.
“The reality is that most Australians can already look forward to a better living standard in retirement than they had while working – even if they interrupt their careers to care for children. Workers with interrupted employment histories lose super in retirement, but get larger part-pensions,” the report stated.
“The poorest Australians get a clear pay rise when they retire: the age pension is worth more than their after-tax income while working.”
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