Social services groups and lobbyists for older Australians are backing a proposal for the federal government to tip in extra superannuation to help low-income workers rebuild their nest eggs but are split on how this support should be provided.
The Australian Institute of Superannuation Trustees is asking the Morrison government to put up to $5000 in the retirement accounts of low-income earners who withdrew money from their superannuation last year to help them get through the pandemic. About 3.4 million Australians withdrew up to $20,000 from their retirement savings during the height of the crisis as businesses shut down and restrictions left many out of work or with limited hours.
Lobby groups are split over how to support the lowest income earners who took funds from their superannuation accounts to get through the pandemic. Credit:Gabriele Charotte
The proposal has attracted support from National Seniors Australia and tentative agreement from the Council On The Ageing Australia. Other organisations suggested different methods could be used to help low-income workers improve their retirements.
National Seniors chief executive John McCallum said the AIST’s initiative “is a small investment now which will bring a low income, disadvantaged group into a more satisfactory position in later life”.
“The one negative is that the money won’t go to other people in that category who didn’t draw down,” Professor McCallum said.
BetaShares senior investment specialist Roger Cohen was also not supportive of the scheme only helping those who withdrew funds, but does believe there “should be some remediation for low-income earners”.
“It is not fair. Someone who struggled and made do so as not to take money from their super would be effectively penalised now compared to someone who took the money,” Dr Cohen said. “Instead, the government should allow those who took money early to top up their super with and receive concessional tax treatment for any additional contributions up to the amount they took out early.”
COTA Australia chief executive Ian Yates said he was supportive of “equitable measures to enable people to restore their super balances” and the group was in active discussions about how this could be done. However, he said he wanted to see analysis of withdrawals, long-term impacts and economic modelling before supporting specific proposals.
Australian Council of Social Service acting chief executive Edwina MacDonald said the group wanted a regular, annual government contribution to boost the super accounts of those earning the least “at the same or a higher rate than the tax breaks for people on higher incomes”.
Grattan Institute household finances program director Brendan Coates said top-ups from the government was “not a particularly effective way” to minimise the risk of people facing poverty.
“If someone has lost their job or income it makes more sense to boost the rate of JobSeeker and assistance,” Mr Coates said, adding young people who withdrew super may end up in well-paying careers in future with little risk of ending up in poverty in retirement.
“[A super top-up] is not a priority compared to increasing the social security net,” he said.
Labor financial services spokesman Stephen Jones said the opposition “welcomes constructive suggestions about how to repair the damage done to super by the goverment’s flawed early access scheme” but said the “main game” was ensuring employers’ super contributions increase to 12 per cent, as currently legislated.
Industry Super Australia deputy chief executive Matt Linden also wanted the focus to be on lifting the super guarantee as a priority. “Beyond that, there have been precedents by previous Coalition governments to provide top ups for low-income earners, albeit when the budget was in much better shape,” he said.
Superannuation Minister Jane Hume said the early release scheme was not compulsory and the majority who released funds use them to pay down debt.
“The best way for the government to help young workers rebuild their retirement savings is to do everything we can to help them get back into a job soon,” Senator Hume said, adding the JobMaker hiring credit would help young people get back into work.
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