- New analysis shows that for every $20,000 withdrawn under the early access to super scheme, an additional $50,000 will be required to be paid from the aged pension.
- The Industry Super Australia analysis appears consistent with other modelling that shows the long-term cost of the scheme, which has drained more than $32 billion from the super system, will exceed $100 billion.
- It comes as the Morrison government faces sustained criticism over the scheme and pressure from the federal opposition to increase compulsory contributions to help make up the difference.
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The cost of the early withdrawal of super, one of the most controversial policies to be enacted during the pandemic, is set to be borne by the taxpayer.
Permitting Australians to drain two allotments of up to $10,000 from their super balances, the eventual cost to an individual’s eventual retirement savings is set to dwarf that figure, according to new analysis from Industry Super Australia (ISA).
Released on Tuesday, ISA figures show a 30-year-old who withdraws the full $20,000 will be entitled to $50,000 more from the age pension. Accordingly, for couples that figure doubles to $100,000.
However, while that bill will be foot by the taxpayer, it won’t even cover what the individual lost by raiding their super. According to the analysis, they’ll still be out of pocket $41,000 per person, not to mention reliant on a government pension.
“People know that by upending the whole purpose of super and then cutting contributions, the
government is thinking about the short term and ignoring how it will lumber people with tax hikesto support millions more scraping by on the pension,” ISA chief executive Bernie Dean said.
“This is just reckless, and the community can see that from a mile away. How else do politicians think people are going to rebuild their nest egg and avoid working until they drop?”
With 600,000 Australians expected to have reduced their super balances to $0 using the scheme so far – the vast majority of them believed to be under 35 years of age – the future cost of the policy could be enormous.
A political battleground
It marks the latest battle line in a political fight between federal Labor, super funds and the Morrison government.
Former prime minister and architect of the super system Paul Keating said the policy had put the main burden of income support on “people ratting their savings”, while Treasurer Josh Frydenberg has called it “a lifeline”.
Superannuation Minister Jane Hume has emphasised that the scheme simply gives people access to their own money at a time they need it – hardly a policy departure from a three-term Coalition government.
However, while much has been made of the price to be paid by the individuals accessing the scheme, less emphasis has been given to the long-term costs to future governments – which is to say future taxpayers.
This may prove a more uncomfortable truth for the Morrison government which trumpets its fiscal responsibility credentials. It did, after all, deny JobKeeper eligibility to a flood of casual and visa workers on the very basis of budgetary burdens.
However, as critics of the scheme have pointed out, the same rationale appears to be suspended from its decision to plough on with the super scheme. Rather than offered targeted government support now, Australians – especially women and the young who carry disproportionately smaller super balances – have had to fall back on their own retirement savings.
Tuesday’s analysis highlights the eventual cost will in fact be far higher tomorrow than simply offering extended government support today.
The latest APRA figures show 4.3 million withdrawal applications have been made, pulling $32 billion out of people’s savings. Factoring in multiple accounts and multiple applications, it’s assumed there’s at least one million Australians who have pulled out their super.
With months left to run, the policy could end up costing future taxpayers upwards of $100 billion in additional strain on the pension system – a figure repeated in other analysis.
In doing so, the Morrison government appears destined to leave all Australians to pick up a much bigger bill.