Nearly 600,000 workers aged under 35 have drained their super balance to zero under the federal government’s controversial early access scheme.
Since the government introduced the scheme as part of the COVID-19 economic response, 2.5 million Australians have withdrawn funds.
Former Prime Minister Paul Keating – the architect of Australia’s super scheme – criticised the federal government for leveraging young people’s super balances as a response to the pandemic.
“Now their pool of savings has been lost to them when in fact [there] should have been public support from the get-go,” Mr Keating said.
Mr Keating drew an equivalence between the $32 billion that had been withdrawn from super accounts and the $30 billion paid through the government’s JobKeeper and JobSeeker programs.
“Of the income support in Australia to date, in this COVID emergency, $32bn has been found and paid for by the most vulnerable, lowest-paid people in the country…” Mr Keating said.
IEUA-QNT Branch Secretary echoed Mr Keating’s comments and said early access was never contemplated in the design of the super system – for good reason.
“It’s no secret that the power of super is in compounding interest,” Mr Burke said.
“Even a seemingly small sum, when withdrawn decades early, could mean hundreds of thousands dollars’ less upon retirement,” he said.
Mr Burke said workers were not to blame for the inevitable impacts widespread early super withdrawals will bring.
“Many Australians are suffering acute financial strain during the COVID-19 pandemic and it is understandable that they would seek any support available to them,” Mr Burke said.
“However, the lack of government scrutiny over the early access scheme has undoubtedly led to many withdrawing funds without genuine need.
“As a result of the federal government’s actions, we will see a generation of workers facing a relatively bleak future in retirement.
“The damage to those workers’ super balances is unlikely to ever be repaired,” Mr Burke said.
Future super guarantee increases at risk
Mr Burke said the government’s undermining of the super system through early access also casts doubt over legislated increases to the super guarantee (SG) rate.
“Under current legislation, the SG rate paid by employers should increase from 9.5% to 10% in 2021 and progressively increase to reach 12% by 2025,” Mr Burke said.
“The reason we are stalled at 9.5% is because the former Abbott government implemented a freeze in 2014 to delay increases by three years.
Mr Burke said another delay of SG increases would inflict even more economic harm upon workers.
“It’s been established that a baseline rate of 9.5% is not sufficient to provide a comfortable retirement,” Mr Burke said.
“If we’re going to provide secure retirements to as many Australians as possible, we must raise the SG rate.
“Failure to increase the rate will see the next generation saddled with the burden of funding pensions for large numbers of Australians.
“Add to this, the current situation where hundreds of thousands of workers have drained their super balances to zero and raising the SG rate becomes absolutely critical,” he said.