More than 1 million Australians will access up to $10,000 from their superannuation funds in the coming weeks. But is it really in their best interests?
One of a number of measures introduced by the Morrison government to ease the financial burden of the Covid-19 pandemic, it will immediately drain national savings by in excess of $10 billion.
The long-term impact will be several multiples of that figure, and we are due to go around again in the new financial year with another $10,000 accessible.
Millions of Australian workers have either been laid off or had their hours slashed and many are in financial distress. They need money to pay mortgage repayments or rent, loans, insurance premiums and rates, as well as the basics such as food and toilet paper (if they can get it).
The government has put in place jobseeker supplements, 2 one-off lump sums and jobkeeper wage top-ups which will have an enormous impact. However, many, including casual workers and temporary visa holders, may not be eligible.
The access to super upto $10,000 tax free is an additional measure designed to buttress the economy and put money into pockets, particularly of those without access to the Covid-19 support monies.
For many, the superannuation monies will be vital to ride out the pandemic and if it comes at the cost of a diminished retirement income, so be it. But for others, there are alternatives which should at least be explored.
All the major banks have put in place substantial hardship programs, including moratoriums on mortgage repayments. Some credit providers have done likewise and some will have involuntary unemployment insurance.
Some rate relief is available from utilities, telcos and councils and rents may be negotiable, or some limitations put on evictions.
Insurance companies are allowing premium holidays or deferrals with reinstatement of cover thereafter without fresh underwriting. And, for those fund members suffering disability because of Covid-19 or other injuries or illnesses, they may be eligible for income protection monthly payments or TPD lump sums.
Whatever may be available, the point is that members should be presented with the options and the long-term consequences of accessing their super before they pull the trigger
With the first round of payments this simply has not happened.
There have been attempts by the superannuation industry to warn members, only to be criticised by the likes of Senator Bragg on the dubious premise that they are illegally using members money to undermine government legislation.
Consumer groups have also been trying to get the message to vulnerable consumers, but they have limited resources.
It is probably too late for the first tranche, but a comprehensive communication and advice package needs to be put in place before July to deal with the second round of superannuation payments.
Members should receive standard information about the pros and cons of early access to the $10,000 and be referred to a properly funded consumer advice service, such as the National Debt Helpline, for free advice, including as to alternatives to deal with debt problems.
Otherwise, the retirement incomes of many Australians will be unnecessarily and permanently reduced.