Should the government repay members forced to access their superannuation?

By Cameron Micallef

July 17 2020
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The government is being urged to use the $60 billion it saved on the JobKeeper program to repay vulnerable members who needed to access their superannuation early.

government repay members forced to access their superannuation

During a conversation with nestegg, Future Super co-founder Kirstin Hunter explained how money left aside to support vulnerable workers should be used to support them.

“If you look at the budget issues that the government had in overestimating the amount they would have to pay out through JobKeeper, they overestimated to the tune of $60 billion.

“That pool of money had been earmarked to support the community through the coronavirus crisis; it is more than enough money to pay back the superannuation to everyone who has to access it early.

“If the government wanted to support people directly instead of forcing them to tap into their life savings, the money is certainly there and we could do that,” Ms Hunter said.

Two-tier retirement system

Figures released by the government have previously revealed that half a million people whipped out their superannuation balance, which could create a two-tier system in retirement.

Cumulative early super withdrawals now stand at $23.3 billion, rapidly approaching the initial Treasury estimate of $27 billion. The latest data includes a “significant increase” of 511,100 applications from 29 June to 5 July, with approximately 346,000 Australians making a repeat withdrawal. With 165,000 initial applications also being made, the total number of applications now stands at 2.7 million since the inception of the scheme.

“What that means especially for younger people, that the accumulative impact in earning compound interest is going to be lost,” Ms Hunter said.

“It is going to put a lot of people in a position where they are not going to have enough in their superannuation balance to retire.

“It will put pressure on the health system to cover healthcare services if they can’t pay themselves; it will put pressure on the housing market if they can’t pay their mortgage; it will put pressure on people’s children if they don’t have money to survive,” she noted.

Ms Hunter explained that individuals can only their access super if they have suffered a reduction of income or lost their job entirely.

“These people already aren’t contributing to their superannuation balance at least at the same rate they usually would be because they are earning less. So, already their super balance isn’t growing and they are doubling down on this disadvantage by taking out $10,000.”

The superannuation co-founder explained that the size of the superannuation system has many believing it is a pool of funds that can help Australians; however, she argues it is not evenly distributed.

“What we are setting ourselves up for is a two-tier retirement system where people who are well off, who have had jobs that haven’t been affected by the crisis, who haven’t had to dip into their life savings to survive are going to have enough money to retire with and those who are vulnerable are going to be made more and more vulnerable over time,” she said.

“We as a society have a choice to make. Do we want to see our government spending our hard-earned taxpayer dollars on corporate subsidies, propping up failing industries such as the fossil fuel industry to the tune of $12 billion a year, or do we want to supporting our people through a crisis,” Ms Hunter concluded.

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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Retirement