According to APRA’s early release figures for the week to 19 July, super funds have processed 3.9 million applications for early release, 1 million of which had applied for both the first and second tranche of release payments.

Super funds have now paid out $28 billion since the start of the scheme, surpassing Treasury’s initial estimates of $27 billion.

Betashares CEO Alex Vynokur said that while he is not surprised the government has extended the policy, he believes it is going to exacerbate the issues Australians face in retirement.

“However, I am disappointed by the government’s decision to extend the scheme to the end of the year. The merits of the policy were not there when it was announced, and there is much more downside than upside,” Mr Vynokur said.

“The government now has data to look [at that and show] who is accessing their super early and how those funds are being used. There is enough evidence emerging that the use of proceeds is in many occasions inconsistent with the intention of the policy.”

Shadow assistant treasurer and the shadow minister for financial services Stephen Jones also expressed concern over the long-term impact, as well as fraudulent claims.

“This is a vote of no confidence from the [government] in their own ability to deal with soaring unemployment and the economic storm ahead,” said senator Stephen Jones. “Not only does Scott Morrison have no plan to create jobs and get Australians back to work, the [government has] told Australians doing it tough that their only option is to raid their retirement savings.”

Long-term implications

Research released by JD Power revealed that Australians were already worried about the impact of COVID-19 on their retirement.

Retirement plans have been pushed back given the pandemic’s effect on personal finances, with 8 per cent of Australians saying they will delay retirement. Those closer to retirement have more strongly indicated a delay in retirement (12 per cent of adults aged sixty and above). 

The Association of Superannuation Funds of Australia (ASFA) acknowledged the extension of the federal government’s early release stimulus scheme but warned against the long-term impacts of drawing down private retirement savings, both on individuals and the broader economy.

ASFA CEO Dr Martin Fahy said: “These are anxious times and we face challenging economic headwinds. As the Treasurer outlined today, Australia remains in a relatively manageable position in terms of debt, compared with our OECD peers.

“If low-income earners and young people’s superannuation continues to be eroded by the early release stimulus scheme, we risk losing sight of superannuation’s intended purpose, which is to provide adequate income for Australians in retirement.”

Industry Super Australia warned that policy must stabilise in the wake of the extension and that the government must proceed with the legislated increase to the superannuation guarantee. 

“The extension of the scheme highlights how vital sticking to the legislated super rate rise (by 0.5 [of a percentage point] in 12 months’ time) will be for Australians to help rebuild their retirement balances,” ISA chief executive Bernie Dean told sister brand Investor Daily.

“We’ve [supported] the policy intent of this scheme to deliver money to those in need, but we’ve also seen how it can be misused – through troubling reports of fraud, significant amounts of ineligible applicants and evidence super is being used for highly discretionary spending – so, it is critical this is only a one-off extension in the deadline to make a claim.”

The super group also explained that more than 145,000 Queenslanders have wiped out their retirement savings, with raising super the only way to recoup losses.

Figures showed that around $7.4 billion from super has been paid to Queenslanders, and 27 per cent of Queenslanders accessed the scheme – the higher proportion in the nation.

“If the government backflips on its legislated promise to lift the super rate to 12 per cent, billions more will be drained from Queenslanders’ retirement – a bill they cannot afford,” Mr Dean said.

Almost 1 million applications have been made by Queenslanders to access their super – workers in the electorates of Brisbane, Griffith and Moncrieff withdrew the most.