No ‘free for all’ on super, sector warns

Industry Super Australia has warned the government not to introduce more policies for early access to super in the October budget

Industry Super Australia chief executive Bernie Dean

Industry Super Australia chief executive Bernie Dean has warned the federal government not to introduce more policies for early access to superannuation, including helping first home buyers finance a deposit on a house, in the October budget.

“We are concerned that the so-called popularity of the early super release scheme during the crisis could be used to make it a permanent feature of superannuation,” Mr Dean said in an interview with The Australian.

“Superannuation is a really good part of Australia’s national fabric,” he said. “It’s money for people’s retirement.

“It has had bipartisan support for the last 30 years. The minute you start saying that it can be used for housing or a first home deposit or other reasons, you start to unpick the system.”

Mr Dean, who runs the industry organisation representing the $700bn industry superannuation sector, said the industry was worried that the move for early access to super announced to help people cope with the pandemic could become a rationalisation for a more government policies allowing much easier early access to super.

Mr Dean said providing early access to super for home deposits would only push up the price of housing.

“Plenty of people aspire to have their first home, but using super to get there is a fool’s game.

“If you allow it to happen, the only thing which will happen is that the price of housing is going to go up.

“The money they will access will be absorbed into the inflated price of the existing property and will leave them with significantly less in terms of retirement savings.”

He said people who took out $20,000 from their super at a young age would lose four to five times that in their expected retirement savings.

The Government’s early access to super scheme has already seen more than $30bn withdrawn from super so far this year with hundreds of thousands of young people withdrawing all of their super balances.

The concern about more measures to access super comes as the government has signalled that it may also review its legislated commitment to move towards increasing the superannuation guarantee from 9.5 per cent to 12 per cent by July 2025.

The super guarantee is to rise to 10 per cent in July next year.

The Masters Builders Association has been urging the government to allow first home buyers to access as much as $50,000 from their retirement savings to build or buy a house in addition to a $5bn construction stimulus in the October budget.

The proposal is being strongly opposed by the super sector which fears it could be seen by the government as an easy policy stimulus measure for the housing sector which would not drain federal revenues.

Short-sighted

“What we are fearing is that the government wants to unpick a system which is working well,” Mr Dean said.

“This would represent a breach of that thirty year support for the idea of having a national retirement savings policy.

“It is short sighted and will take the country in the wrong direction.”

Mr Dean said there was strong support in the community for the super system and the government risked a backlash if it continued to erode it.

“There would be a very strong reaction from the community against it,” he said. “It would reflect how short sighted these moves would be.

“Some of the people involved in this debate will get a rude shock if they think they are going to get a smooth run in pulling the system to bits, particularly on the basis of the recent changes.”

Mr Dean said there were already provisions allowing early access to super in cases of hardship.

He said the erosion of the compulsory super system would only mean more people would have to rely on the age pension for their retirement.

“Super can play a great role not only in the short term as an investment engine to get us out of the economic funk we are in.

But over the longer term it will help avoid the big ticking time bomb of an ageing population and additional stress on the pension.”

Mr Dean said the “overwhelming majority of Australian workers” wanted the increase in the superannuation guarantee level to 12 per cent.

“Even when people are presented with both sides of the argument about the SG going up, a significant majority of Australian workers want it to proceed.”

He said he found it “unsavoury” that academics and politicians who were on generous pension plans were arguing that workers should not get more than 9.5 per cent of wages in superannuation.

“The Prime Minister and the Treasurer have built up a bond of trust with the community, as many leaders have during the COVID crisis,” he said.

“That bond could be easily broken by backflipping on an importance promise to the workers of Australia.”

He said the government had “other levers” it could pull to avoid a recession.

It was not fair to put workers in a position where they were being asked to choose whether they wanted to access their super early or retain it for their retirement.

“They know they are being asked to put their hand in their own pocket where, in the past, the government has done more to get them through.”

He said there was “emerging bitterness” that people were having to do “much of the heavy lifting” by drawing on their super to get through the economic side effects of the pandemic.