New analysis from Industry Super Australia (ISA) estimates 395,000 people under-35 have eroded their super balance with hundreds of thousands of young Australians wiping out their retirement balances under the government’s early release of super scheme, heightening fears the scheme could lead to a future generation left languishing on the pension.
ISA estimates that about 480,000 Australians across all age groups could have wiped out their super, even before the second tranche opens. In March the government broke open super’s preservation rules and allowed Australians who had lost their jobs or had hours reduced to access $10,000 in super and a further $10,000 from July 1.
The research follows calls from a noisy group of backbench MPs to dump the incremental and legislated increase to the super rate from 9.5 per cent to 12 per cent by 2025. But if those MPs get their way more workers would be more reliant on the aged pension - a bill everyone pays through higher taxes.
The ISA analysis is based on ATO data on the proportions by age of those with accounts below $10,000, and Treasury statistics on the age distribution of early release. Estimates have been updated to the 14 June APRA totals.
On average about 15 per cent of Australian workers have accessed their super early. Three states were above the national average - Queensland at 20 per cent, Northern Territory 19 per cent and Western Australia 16 per cent. Only 8 per cent of ACT workers accessed their super early.
Industry Funds have supported this scheme’s intent to get cash to those in dire financial need, they have already helped more than 1.4 million Australians tap into their super. But there have been troubling reports of super being used to gamble, buy alcohol or other types of discretionary spending.
As the second tranche of the early release scheme opens ISA is renewing calls for members to only access their super as a last resort. A 25-year-old taking out $10,000 now could have $49,000 less in retirement, a 35-year-old could lost up to $34,000 and a 45-year-old up to $23,000.
The government estimated 1.65 million would take out $27 billion from super, but already 2.1 million have taken out at least $15 billion and it appears likely demand will far surpass forecasts. Despite the greater numbers, Industry Funds have prepared to deal with the demands of this scheme.
Industry funds have paid more than $10.3 billion from super, 96 per cent of it within five business days of receiving the request from the ATO.
“Those early contributions are like yeast, without them you’re left with a much flatter nest egg. Industry Super Australia chief executive Bernie Dean