Four years after the pandemic emergency was declared, the massive financial and social cost of allowing Australians to raid their retirement nest eggs is becoming clearer.
New analysis shows the Morrison government’s early release of superannuation scheme could hit future taxpayers with as much as $85 billion in additional costs, as people who dipped into their super savings are forced to rely on the aged pension.
Modelling by the Super Members Council — which represents mainly industry super funds managing $1.4 billion of retirement savings — shows the Early Release of Super Scheme will mean a higher reliance on the aged pension and lower tax from superannuation hitting $2.5 billion a year by the mid-2060s.
Super Members Council chief executive Misha Schubert told the ABC’s AM program the financial toll of the early release scheme, where members miss out on compound interest, will burden all Australian taxpayers for decades to come.
“In the early stages of the COVID pandemic, before government assistance kicked in with JobKeeper, many Australians were encouraged to sacrifice their retirement savings to support themselves,” Ms Schubert said.
“Tragically, that will now leave many people significantly poorer in retirement.
“Those withdrawals will also cost the next generation of taxpayers in a case of fiscal long-COVID.”
It’s been estimated that 3 million Australians withdrew around $38 billion from superannuation accounts under the scheme, which was introduced as an emergency measure in April 2020 in the face of an economic crisis in which the unemployment rate was feared to hit 25 per cent amid nationwide lockdowns.
Australians who claimed to be financially impacted by COVID-19 were able to apply to access their superannuation between April and December 2020 to take two maximum portions of $10,000, totalling $20,000.
Super ‘raid’ could cost 30-year-olds $90,000-plus at retirement
According to the analysis, all of today’s 20-year-olds are projected to pay about $3,000 more tax to cover the higher pension bill caused by the scheme.
In an example of a 30-year-old who withdrew the maximum $20,000 from super during the pandemic, there would be would $93,600 less at retirement leaving the member “dramatically worse off in their lifetimes”.
In a statement, Assistant Treasurer Stephen Jones attacked what he called the Morrison government’s “raid” of super during the pandemic.
“It’s crystal clear that the former government’s raid of the super system had a devastating impact on the retirement savings of millions of Australians,” Mr Jones said.
“It’s why the Albanese government is committed to legislating an objective of super to help prevent this sort of short-sightedness ever happening again.”
The expected toll from the super access program comes as a Senate committee examines the objective of superannuation.
The federal government maintains the main objective must be to provide a dignified retirement nest egg that shouldn’t be eroded by populist proposals such as using super for a housing deposit, paying off HECS debts or to fund aged care.