If 1.35 million Australians demand early access to their superannuation as a result of the government’s new policy, around $25 billion could be wiped from funds.
The analysis comes from the Actuaries Institute, which is recommending that the Australian Taxation Office “play a significant role in payment of limited, early release superannuation to people financially impacted by COVID-19”.
Passed as legislation earlier this week, the policy sees eligible Australians able to access up to $10,000 from their superannuation this financial year and next financial year if they are suffering financial hardship.
It comes as the ATO announced its creation of a “one-stop shop” for anyone looking for essential information regarding the early release of super.
The Actuaries Institute noted that the ATO will be responsible for making the determination on early release, but said it could also hold responsibility with regard to payment distribution and possible invoicing of superannuation funds.
The convenor of the Actuaries Institute’s superannuation practice committee, Tim Jenkins, considered that “there may be a need for the funds and the government to look at ways to enable early access and smooth out the ability and capacity of funds to pay”.
“A possible solution is for the ATO, in addition to making the determination, to distribute the payments to further streamline the process to get money into the hands of those in need quickly,” he outlined.
Mr Jenkins said the ATO “could then invoice the superannuation funds over the following few months to spread the cash flow impact on funds”.
According to the Actuaries Institute’s chief executive, Elayne Grace, it would have been a difficult financial decision for the government to balance short-term health and economic risks to the community against the long-term effect the early release of super would have on retirement incomes.
Noting that early access to super “will help ameliorate some of the short-term pressures people, their families and their communities face”, Ms Grace said there are several key issues to note.
These include “liquidity for funds, locking in losses for individual investors before investments have time to recover, and also, if superannuation balances fall to zero, there are issues around insurance.”
“We know large parts of the community have insurance through their super fund,” she commented.
“We want people to have access to their funds, to help them through very difficult times, but it is important to know and map the consequences,” she forewarned.
She’s not the first person to raise concerns around the early access to super, with both Industry Super Australia and the Australian Institute of Superannuation Trustees urging individuals to consider their super as a “last resort”.
“The Actuaries Institute would encourage the government to commit to restoring and maintaining the integrity of the retirement income system after the crisis ends,” Ms Grace concluded.
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