Three major fiscal safety nets saved many Australians from economic penury in this pandemic – the taxpayer-funded JobKeeper and JobSeeker schemes, and the superannuation early access scheme.
When the Government mandated lockdowns of large parts of the economy, hundreds of thousands of people had no idea where they’d get the money to pay rent and mortgages, buy food and pay bills. Allowing people with immediate financial needs to quickly access a small amount from the $3 trillion superannuation pool was a worthwhile idea which the FSC and our superannuation fund members immediately supported. We still do. Superannuation funds are the stewards and fiduciaries of people’s savings, not the owners. This extraordinary time called for an extraordinary measure.
The early access scheme has been successful with some 2.4 million Australians applying to access their superannuation already – with total drawdowns of $17 billion. As evidenced by the ATO website crash last Wednesday morning at the start of the new financial year, many more Australians are desperate to access the scheme knowing there may be a deeper recession ahead of us as JobKeeper ends or tapers off and whole industries, particularly tourism and education, set to languish in the doldrums for months and even years. More than a million Australians could be out of work.
Removing money from your nest egg should be – and is – a serious decision, and every day we hear stern warnings on the perils of doing so from a queue of well-remunerated people in safe, secure jobs (often paid for by the taxpayer, or indeed, by the superannuation industry). Perhaps these commentators need to get out of their ivory towers and meet a few Australians who’ve lost their jobs overnight, simply to remind them funds are no more than the custodians of private savings. Pansy Leung and her husband Adrian Eastman, who’ve both been stood down, told ABC News they’d never been so frugal in their lives. Pansy, working two casual jobs to pay the bills, said: “I hope this teaches my kids resilience and that we don’t need that much.” Her brave composure finally crumpled. “I just miss my old life,” she said, wiping away tears.
It may have taken a pandemic for Australians to finally engage with their superannuation, but most do not appear to be tapping into their savings lightly. One Facebook site which has gathered people's reasons for early access shows many say the money is for paying bills, paying down debt and staying afloat after becoming unemployed. Many pledge to top up their super when they can again.
While a few may have opted to use the funds to contribute towards a house deposit or lifestyle purchases, these are the exception and not the norm, and these examples should not be used to demonise the vast majority of honest Australians who have accessed their super to help make ends meet.
And while we support the temporary early access scheme, the FSC’s unwavering policy position is that superannuation is Australia’s only genuinely intergenerational public policy. The overall integrity of the scheme should be protected and the purpose of superannuation should be enshrined in legislation. The early access scheme should not be the thin edge of the wedge, opening the door for compulsory retirement savings to be tapped permanently for home buying; paying off HECS fees or the like. Turning superannuation accounts into little more than transaction accounts undermine the superannuation scheme and won’t lead to better retirement outcomes for Australian workers.
To demonstrate a commitment to helping Australians save for retirement, we urge the Government to do three things – make sure the early access scheme is limited to an exceptional needs-based scheme; ensure there is an incentive for Australians to top up depleted nest eggs with co-contributions and higher concessional caps, and stick to the legislated increase for the superannuation guarantee to 12 per cent by 2025.
It’s also important, as the Treasurer said, that our enormous collective pool of superannuation savings be put to work for the national economic recovery, funding infrastructure projects. The FSC has detailed our own plan for doing this, through Australian Superannuation and Infrastructure Investment Vehicles (ASIIVs) which would expand access to existing asset recycling programs to all superannuation investors, including self-managed funds. Increasing access to infrastructure projects would support cash-strapped state governments by giving them access to an additional $1.7 trillion from the national superannuation pool.
If Government delivers these three pieces of policy, Australians can be confident that their superannuation system will support them through the current crisis; but also remain a source of nation-building capital for the future and continue to grow to support their retirement.
OPINION PIECE - by Sally Loane, Chief Executive Officer