'Retirement At Risk': Warnings Over Coronavirus Superannuation Plan
Withdrawing cash from your super account should be a "last resort" to battle coronavirus money woes, experts say, with scorn poured on part of the government's financial rescue plan.
"We urge the government to step in and provide real wage subsidy support so people are not putting their retirement at risk," Australian Council of Trade Unions president Michele O'Neil said.
Unveiled as part of the federal government's coronavirus financial assistance package last weekend, along with a temporary doubling of the Jobseeker payment and a $750 lump sum for those on other welfare payments, was the option for Australians to withdraw up to $20,000 from their superannuation if needed.
Further 5.2 Million Aussies Eligible For $750 Payment Under New Stimulus
Welfare and income support recipients will be eligible for a "time-limited" supplement to help them get through the coronavirus pandemic -- and millions more now qualify for a $750 one-off payment under new stimulus measures.
"Eligible individuals will be able to apply online through myGov for access of up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to a further $10,000 from 1 July 2020 for another three months," the government said in a statement on Sunday.
"They will not need to pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments."
Prime Minister Scott Morrison said in an interview with the ABC that "we've provided access to people's savings" in case they find themselves unemployed and cannot survive on the Jobseeker payment alone.
"That's a significant change," he said.
While the move to double welfare payments has been met with near-universal acclaim -- despite massive lines forming outside Centrelink offices, and government websites and phone lines going down, as people try to apply for the payments -- the idea to allow people to crack open their superannuation retirement nest egg has been slammed by workers' groups.
Academics have also urged caution in using the plan.
"It is nothing short of fiscal stupidity," said Transport Workers' Union national secretary, Michael Kaine.
Super accounts, as well as the wider financial system and markets, have been "reduced significantly" in recent weeks, he said, blasting the idea that people should dip further retirement savings.
"It will lock workers into significant market losses... it is also dangerous as it will leave workers and the economy in a worse off position to bounce back from the crisis once the pandemic is under control," Kaine said.
Labor's shadow treasurer, Jim Chalmers, said he felt that "early access to superannuation should be a last resort, not a first port of call".
"We also think that there are real issues with encouraging people to divest from super when the market's in the condition that it is now," he said Sunday.
"It's not good for them, it's not good for the system more broadly and we don't want to create problems for people's retirement down the track."
Associate professor Geoff Warren, a finance expert at the Australian National University, said he thought allowing people access to their super was "sensible" policy, but urged caution for anyone considering it.
"It's a choice of whether you need the money more now than in retirement. It's a trade-off. Your balance will be lower when you retire, but you may really need the cash now," he told 10 daily.
"Some people might need it more now, so it'd be probably a senible thing to take it out. But if you have other savings, super should be used as a backstop rather than a first option."
Warren said the cost of taking the money out could be considerable, especially if the person is young and has many years before retirement for their super account balance to grow. He claimed that, assuming a 3.5 percent real return on investment over a number of years, that $10,000 could generate more than $35,000 by retirement age if left alone.
"The younger you are, the more it will compound," Warren said.
"I think most people know it's a nest egg for retirement, so I hope people use it sensibly."
Helen Hodgson, a professor of taxation at Curtin University, also urged restraint.
"As a general rule I’d say it's a good idea not to draw on your super when you're younger, but compensating that is the markets are at such a low that there's plenty of time to recover, and super is a long-term investment," she told 10 daily.
"My general advice would be to not take it out unless you have to, but if you do, you're taking it out at a low point, and the markets will recover."
However, like Warren, Hodgson said some people may genuinely need to use the option.
"If you've a mortgage to pay, school fees, you may decide the money is better in your hand now than in future," she said.
"If you're using it to keep a roof over your head, or for groceries or education, that's the most important."
Industry Super Australia CEO Bernie Dean said his group had not been consulted on the plan, and urged caution, saying the option must be done in a way "that doesn’t undermine our national savings system".
The Self Managed Super Fund Association also said drawing on super should be a "last resort", but acknowledged that the "extraordinary times" warranted the option.
"It’s imperative that the Government ensures that there are clear rules in place to ensure only those in genuine hardship can have early access to their superannuation," said SMSF Association CEO John Maroney.