The chances of again being able to access your superannuation before retirement will be a lot slimmer if the federal treasurer gets his wish.
Treasurer Jim Chalmers is looking to legislate the objective of superannuation to enshrine the definition to include preservation.
The move to ensure super will be preserved until retirement has been dubbed a “guiding light” by Industry Super Australia (ISA).
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The government’s proposed wording is an excellent starting point for the debate and well-reflects what the community understands as super’s purpose – savings solely for retirement, ISA said in a statement.
The move comes after more than 600,000 Australians essentially drained their retirement savings during COVID-19, when the Morrison government allowed workers who had lost work during the pandemic to access up to $20,000 of their superannuation savings.
Accessing super early-career came at a steep price to savings. A 30-year-old who withdrew $20,000 would have up to $80,000 less at retirement, according to ISA analysis.
“The treasurer’s is a good proposal because it safeguards the future of working people and reflects what they already understand as super’s purpose - savings solely for their retirement,” ISA CEO Bernie Dean said.
“It should help avoid another disaster of allowing people to tap into super early for any reason, which hurts everyone. We look forward to working with the government to bring this to life in law so that workers have the best shot at a good life in retirement.”
Before compulsory super, retirees had little savings and mostly relied on the aged pension. Now, the average retiree’s super balance is around $360,000.
ISA modelling forecasts that a 30-year-old on the median wage could have more than $500,000 at retirement.
The treasurer has queried the long-term cost of superannuation tax breaks, which are on track to exceed the aged pension by 2050.
Chalmers said the tax concessions were at odds with the government's goal of repairing the budget and having a functional super system.
Tax breaks on super were introduced to encourage more people to save super rather than rely on the pension. However, critics say the existing rules are being used by wealthy individuals to minimise tax.