Embed balance preservation say industry funds
The cumulative cost of the former Government’s COVID-19 early release superannuation scheme will amount to around $70 billion in forgone super earnings tax and increased age pension payments by 2085 according to industry funds.
The funds therefore want the Government legislation defining the objective of superannuation (Superannuation (objective) Bill 20230 to make it much harder for any future Government to repeat the early release exercise by making preservation of savings a key principle.
What is more, the superannuation funds argue that making preservation of a key principle would allow funds “to diversify portfolios and invest in a broad range of assets, including unlisted assets”.
The industry funds-backed Super Members Council has told the Senate Economics Legislation Committee that “Extensive analysis shows that policies that adversely impact preservation – such as the COVID-19 Early Release Scheme and proposals to allow first home buyers to access their superannuation to buy a house – are not economically efficient, will not solve the problems they seek to address, and will leave retirees and future taxpayers worse off”.
Under the COVID-19 Early Release Scheme, 3.05 million people withdrew $38 billion in superannuation. Research and analysis5 on the scheme show that:
- one in five Australians aged between 25 and 34 withdrew super, with those under 35 collectively taking out 40 per cent of the total,
- most people thought about the decision to withdraw for less than a week with more than a quarter deciding to withdraw within a day of hearing of the scheme,
- nearly half of applications were made within the opening fortnight of each round and most withdrew as much as they could,
- many people did not estimate, or appear to have mis-estimated, the impact the withdrawal could have on their retirement savings,
- on average, those who used the scheme cut their superannuation balance by 51 per cent and deprived themselves of up to $120,000 at retirement, locking in losses by withdrawing funds in a market downturn and missing the recovery,
- almost 725,000 Australians effectively drained their superannuation accounts under the scheme, with 594,000 (82 per cent) of those aged 35 and under,
- low paid and younger Australians will disproportionately bear the consequences of early release, and
- the cumulative cost of the scheme in forgone superannuation earnings tax and increased Age Pension payments is around $70 billion by 2085, almost double the original quantum taken out.
“Some funds also reported that the scheme had an adverse impact on their returns, as they needed to increase their liquidity by carrying more cash (a lower performing asset) to meet withdrawal requests,” the Super Members Council submission said.
These Industry Funds are starting to get more like the Colesworth Grocery monopoly every day with their excessive control over our Funds. Time to implement Senator Andrew Bragg’s concept of allowing young families to redirect their super to a home mortgage offset account if they wish. Singapore has used super for home mortgage payment for decades.
My Precious $$$$$$$$$$
“It’s OUR MONEY, NOT YOURS”, says Industry Super.
Power tends to corrupt, and absolute power corrupts absolutely.
No mention within their “analysis” about what people did with their money. A lot paid down debts, some invested, some just spent it, but the idea was for people to spend it to stimulate the economy, so what were the impacts on the economy and asset prices etc versus the situation of of people having no access to their super? To say people are worse off in retirement by only mentioning the impacts on their super only covers half the story.
There is pretty comprehensive data that shows the vast majority of those withdrawals were wasted on gambling and luxuries. I don’t agree at all with this new proposal by the Gov’t but let’s not pretend the covid withdrawals were anything close to a good idea. People just withdrew the money because they could spent it or they felt they could “invest” it better (read gamble on NFTs or crypto).
They will have to campaign for this at the next election. I guarantee the Australian public will vote this down.
You’re utterly deluded if you think democracy will play any part in this. The union movement now controls about one third of Australia’s superannuation. Most Australians are not even aware of this, let alone voted for it. It has been achieved by deception, graft, and the loyal obedience most members of the parliamentary Labor Party have for their union masters.
And watch this space for the union movement taking a controlling leaf out of the playbook of BlackRock etcetera….
This is why it is the responsibility of anyone who does know to inform as many people as possible. I’m sure the majority of people will not appreciate being told how much of their capital they can draw from retirement as a lump sum and under what specific circumstances. It is after all their money and not that of industry super or their union mates.
Although Albo will do a good enough job tanking in the next election all on his own.