How panic spending super has become the new toilet paper

Accessing superannuation in the haste of coronavirus panic could come back to bite us in the form of a future wave of welfare-dependant retirees, warns Sophie Elsworth.

The panic buying of toilet paper has now turned to the panic pulling of super.

And when many of us act in haste we make silly decisions.

Accessing super early could well be one of them.

There’s no doubt some super fund members will be using their retirement pots of cash as ATMs.

Punch in a few details, and bingo, out pops wads of cash.

Already more than 975,000 Australians have rushed to register their interest on the myGov site signalling they want to get their hands on their retirement savings early.

And this was before the cash was even ready to access.

But on Monday that giant lid on the big fat $3 trillion kitty opened up and now it’s a free-for-all.

As one super top dog told me this week, “it’s just a simple tick of a box and away you go”.

And Industry Super Australia – the mob that represents a bunch of the biggest industry funds in the country – released data showing it could result in more than one million Australians who are NOT eligible to access their super doing it.

In total they are estimated to withdraw up to $14 billion.

That’s insane in itself.

The online application process relies on “self-assessment” – in other words telling the truth.

And believe me there will be a lot of people trying to flout the system, who lie on their applications and get the money and run.

There is no doubt some super fund members will be using their nest eggs as ATMs. Picture: istock

All Aussies have to do is tick a few boxes saying they have been made redundant this year or have had a significant drop to their income and away they go.

No paperwork is required and documents proving this do not need to be submitted.

Funds have already voiced their concerns about this but the Australian Taxation Office has said they will hit cheats with hefty penalties if they catch them doing the wrong thing.

The background checks are not there right now but it’s likely they will get caught out later.

When Federal Treasurer Josh Frydenberg announced the new COVID-19 rescue package last month he tipped 1.6 million Aussies would sign up and withdraw $27 billion.

But some industry experts tip more than 2 million Aussies will be rushing to get their hands on this large chunk of cash.

Eligible Aussies are able to access $10,000 this financial year and another $10,000 next financial year.

But for a 30-year-old withdrawing $20,000 cash now could end up leaving them $97,000 worse off in retirement.

And those getting the cash now may well be receiving the largest chunk of money they have ever had in their hot little hands.

And goodness knows what they’ll do with it.

Super funds have told me it’s very likely they will be many people who blow on it crap including flat screen TVs or even use it to wipe credit card debt.

While wiping debt might be a more sensible option, I fear it will just result in people having more space on their credit cards to keep them trapped in torturous debt cycles that the banks love.

Rack up debt, don’t pay it off, and keep racking up more and more.

Banks are trying to make out they are the financial heroes during this pandemic but they are not.

Many of them are still big companies who have to please their shareholders and by doing this the need to keep generating big profits.

More than two million Australians are expected to put their hands out for cash from the COVID-19 rescue package. Picture: Quinn Rooney/Getty Images

With interest rates often around 20 per cent credit cards it’s one of the easiest ways they can make quickly money from people who are not so good at managing their money.

While in theory handing over super could be seen as a good option – it allows people to access their own cash and use it to get them through this tough period.

But the problems it can cause are much bigger – it’s effectively robbing Peter to pay Paul.

Rip out the money now and they will be less at the other end – that being retirement.

And the consequences mean more of us will be reliant of social welfare, a burden that taxpayers ultimately wear.

It’s a bandaid solution that won’t help people in the long run.

I hope for those who are accessing it they’re doing it for the right reasons because at the end of the day this country already has too much welfare and the financial fallout from this COVID-19 pandemic is going to last a very long time.

Sophie Elsworth is News Corp Australia News360’s national personal finance writer.

@sophieelsworth

Originally published as How panic spending super has become the new toilet paper