Retirement
Next generation will foot the bill for early access to super
If the $32 billion taken out of the superannuation system is not put back in, the cost of pension could almost double, with the next generation likely to pay higher taxes, according to an industry body.
Next generation will foot the bill for early access to super
If the $32 billion taken out of the superannuation system is not put back in, the cost of pension could almost double, with the next generation likely to pay higher taxes, according to an industry body.
Industry Super Australia (ISA) has warned that the superannuation guarantee (SG) increase must go ahead to avoid significantly lower retirement income and a spike in the aged pension that the group claims would be funded through higher taxation.
New research from ISA shows that a 30-year-old who withdraws the full $20,000 would have $50,000 of additional age pension entitlements, while a couple who both draw the full amount would receive $100,000. But that still wouldn’t be enough to cover the lost super, meaning the two case studies would still be $41,000 and $80,000 worse off in retirement, respectively.
ISA chief executive Bernie Dean pointed out that avoiding fixing the problem tomorrow due to economic difficulties today does not help Australians in the long run.
“The community knows the government’s dealing with a crisis, but it doesn’t make sense to backflip on the promised super increase when you’ve just let people raid their savings to prop up spending,” Mr Dean warned.
Despite Mr Dean’s warning, researchers in The Grattan Institute have previously found that any shortfall in superannuation would be made up for in higher aged pensions.
While this would put pressure on the government’s purse strings, it does suggest that members’ retirement outcomes would not fall.
“Although individuals can choose to withdraw and spend their own money under the scheme, the resulting increase in age pension entitlements must be funded by others – likely through higher taxes than would otherwise be the case,” ISA said in its research.
“This appears to have been overlooked by many proponents of early access to preserved retirement benefits. The costs are so significant because of the loss of compound market rates of return that significantly exceed wages growth and borrowing costs for sovereign governments.”
Early super withdrawals have surpassed initial estimates of $27 billion and are now expected to reach $42 billion. Withdrawals currently stand at $32.2 billion.
RELATED ARTICLES
About the author
About the author
Superannuation
Aware Super takes on Australia's gender retirement gap, aiming for financial equality
Aware Super, one of Australia's largest superannuation funds with a 70 per cent female membership, is on a mission to close the gender gap that sees women retire with 30 per cent less super than men ...Read more
Superannuation
Age Pension increase prompts Australians to review their finances
The increase in the Age Pension, which takes effect today, should serve as a prompt for many older Australians to ensure they're maximizing their income as cost-of-living pressures persist, according ...Read more
Superannuation
Retirement reimagined as Australian optimism meets inflation worries in 2023 super fund insights
The latest reports on retirement confidence among Australians present a spectrum of sentiments, with fresh data revealing surprising optimism in some quarters while exposing underlying concerns in ...Read more
Superannuation
Aussie retirees face a shortfall as ideal retirement nest egg doubles what super will deliver
As Australians look towards retirement, the desired superannuation balance that many believe will ensure a comfortable retirement has significantly outpaced what they are on track to actually save. Read more
Superannuation
Super funds eye 6.5% return in 2023, despite a rocky start
As the year draws closer to its climax, Chant West unveils its projection for super funds in what can only be described as a year of economic ebbs and flows. Read more
Superannuation
A deep dive into Australia’s superannuation system
Australia has a robust retirement savings system known as superannuation designed to provide financial security to Australians in their post-work years. Read more
Superannuation
50,000 super fund members impacted by data breach
Around 50,000 member records were impacted by the breach that took place earlier this month. Read more
Superannuation
Two super funds tipped to reach $1tn by 2040
KPMG has released the findings from a new review. Read more
Superannuation
Aware Super takes on Australia's gender retirement gap, aiming for financial equality
Aware Super, one of Australia's largest superannuation funds with a 70 per cent female membership, is on a mission to close the gender gap that sees women retire with 30 per cent less super than men ...Read more
Superannuation
Age Pension increase prompts Australians to review their finances
The increase in the Age Pension, which takes effect today, should serve as a prompt for many older Australians to ensure they're maximizing their income as cost-of-living pressures persist, according ...Read more
Superannuation
Retirement reimagined as Australian optimism meets inflation worries in 2023 super fund insights
The latest reports on retirement confidence among Australians present a spectrum of sentiments, with fresh data revealing surprising optimism in some quarters while exposing underlying concerns in ...Read more
Superannuation
Aussie retirees face a shortfall as ideal retirement nest egg doubles what super will deliver
As Australians look towards retirement, the desired superannuation balance that many believe will ensure a comfortable retirement has significantly outpaced what they are on track to actually save. Read more
Superannuation
Super funds eye 6.5% return in 2023, despite a rocky start
As the year draws closer to its climax, Chant West unveils its projection for super funds in what can only be described as a year of economic ebbs and flows. Read more
Superannuation
A deep dive into Australia’s superannuation system
Australia has a robust retirement savings system known as superannuation designed to provide financial security to Australians in their post-work years. Read more
Superannuation
50,000 super fund members impacted by data breach
Around 50,000 member records were impacted by the breach that took place earlier this month. Read more
Superannuation
Two super funds tipped to reach $1tn by 2040
KPMG has released the findings from a new review. Read more
