Superannuation funds are proposing that the Morrison government should add $5,000 to low-income earners’ retirement funds, after 1 million young workers have emptied their super during the COVID-19 pandemic.
The Australian Institute of Superannuation Trustees’ (AIST) pre-federal budget submission recommended a one-off government contribution to the super accounts of Aussies earning less than $39,837 who accessed their superannuation early.
The AIST, which is made up of about 60 superannuation funds, points to the 3.6 million Australians who accessed the scheme throughout the pandemic.
They highlighted that nearly 1 million young workers under the age of 35 have either closed their super accounts or now have less than $1,000 in them.
AIST CEO Eva Scheerlinck said the burden of the COVID super gap would be borne by low-paid workers, women and those in insecure employment.
“While the long-term impacts of COVID on the retirement savings are still uncertain, evidence shows that the financial burden of lost retirement savings will most heavily impact those least able to afford it – those already experiencing disadvantage and the many Australians who were already facing a retirement savings shortfall,” Ms Scheerlinck said.
Ms Scheerlinck noted that a 30-year-old who withdrew $20,000 through the scheme could end up tens of thousands of dollars worse off in retirement, while lacking the means to make up for this lost ground without policy intervention.
“Young women, in particular, will struggle to make up the COVID savings gap as many will be entering the phase of their life when they take a career break to have children and their employer super contributions are on hold,” she said.
The AIST also said the government needs to resist pressure and stick with legislated increase to compulsory super from 9.5 to 12 per cent.
This is despite the government currently considering a proposal that would allow Australian workers to choose between a higher rate of pay today, or the legislated increase in superannuation.
Labor MP Stephen Jones has called the plan a sneaky tax grab that will hurt workers twice.
“Like WorkChoices, the Morrison government’s plans for superannuation are all about leaving workers worse off.”
“After presiding over the worst wages growth ever, now the Liberals want workers to tap their retirement savings in lieu of a proper pay rise,” Mr Jones said.
This plan will hurt workers twice. Cutting superannuation will cost the average couple $200,000 in lost retirement savings and increase their tax bill.
However, Liberal MP Andrew Bragg highlighted that super is Australians’ money and it doesn’t fall out of the sky.
“What a proposal like this will do is put the people in the driver’s seat so they could decide [whether] they want to have more super or want to have more take-home pay today,” he said.
Mr Bragg opined that “people are smarter than the super funds think”, after a large number of Aussies opted to access their super early under the government’s COVID-19 scheme.
“Most of the money that was taken out of super was put into people’s mortgages to pay them down. So, people wanted to improve their personal balance sheets. And that shows that people are smarter than the super funds think. I mean, the super funds, they think everyone’s stupid,” Mr Bragg concluded.
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