Retirement
Should the government add $5k to low-income super accounts?
The government needs to make a one-off $5,000 payment to boost the superannuation accounts eroded by the early access to super scheme, an industry body has advised.
Should the government add $5k to low-income super accounts?
The government needs to make a one-off $5,000 payment to boost the superannuation accounts eroded by the early access to super scheme, an industry body has advised.
According to an industry submission by the AIST, younger Australians will bear the brunt of the $100 billion super shortfall.
Stats released by the institution show that one in five Australians aged between 25 and 34 age withdrew their super. Under 35s collectively took out 40 per cent of the total amount withdrawn.
Applicants in this age group on average withdrew at least a third of their total super balance in the first tranche and it is estimated that another 15 per cent of members in this cohort completely drained their super savings before 30 June.
AIST CEO Eva Scheerlinck said those who can least afford gaps in their savings accounts, including women, lower-paid workers and those with insecure incomes are most likely to fall due to the early access to super scheme.
“The early release scheme unfortunately forced many people to choose between poverty now or poverty in retirement,” she said. “These vulnerable Australians are unlikely to recover from this without targeted policy intervention.”
Ms Scheerlinck argues that the projected $100 billion shortfall will become a burden on future governments and taxpayers, due to the need for higher pensions.
“Given the difference compound interest makes, a withdrawal made at a younger age has a big impact on retirement balances of this generation,” Ms Scheerlinck said.
“Catching up contributions later in their working life will cost significantly more than the amount withdrawn and will be difficult to achieve for many low-income earners.”
They also argue the contested superannuation guarantee must be legislated at 12 per cent to help give relief to those who will likely struggle in retirement.
The AIST also warned that the legislated increase in the super guarantee must go ahead in order to provide “crucial relief” from the impacts of the super gap. The comments come as Prime Minister Morrison said that while the government had not made a decision on the legislated increase, it was aware of concerns that it could impact wage growth as Australia recovers from the COVID crisis.
“It is the circumstances that have occurred since the election which have made that the case, and prior to the election it was certainly my view and I articulated that, that those were legislated changes and increases and we had no plans to change any of those and that was certainly our view,” Mr Morrison told media.
“COVID-19 has occurred, people’s jobs are at risk and I note, whether it’s Ross Gittins or any number of others who’ve spoken on this issue, normally those you wouldn’t necessarily put in the same group as being agreeing on everything seem to be agreeing a lot on that.”
In addition to the $5,000 payment, the AIST argues for increasing the government’s superannuation co-contribution rate and threshold, removal of the $450 a month minimum SG threshold and super on paid parental leave.
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