Half a million Australians wipe out their super balances

Nearly half a million Australians have cut their retirement balances to zero through early withdrawals, new figures show.

Industry Super Australia chief executive Bernie Dean appearing at a hearing at Parliament House in Canberra.

Industry Super Australia says nearly half a million Australians have reduced their retirement balances to zero through early access to superannuation.

Latest figures by ISA estimate more than 480,000 workers have wiped their super balances clean in the first round of the government’s COVID-19 support measure, which has allowed people to dip into their retirement savings early.

Of those, 395,000 are aged under 35.

As of Wednesday, account holders who are facing financial hardship due to the pandemic are able to access a second $10,000 slice of super in the new financial year.

ISA, which represents 15 industry funds including AustralianSuper and Hostplus, said the incoming second tranche will heighten fears more Australians will make a big dent in their savings.

The economic rupture caused by the pandemic has prompted a group of Coalition backbench MPs to call for the scrapping of the legislated rise of the superannuation guarantee to 12 per cent. Their call has been vehemently opposed by ISA.

ISA chief executive Bernie Dean said the legislated rise in superannuation contributions from employers will be imperative to repairing the damage done to individual retirement balances.

“To have hundreds of thousands wiping their savings out midway through their life is a tragedy waiting to happen and it will affect everyone,” Mr Dean said.

“The Prime Minister and Treasurer must stick by their promise to increase the super rate because it’s critical to helping these people rebuild savings they’ve wiped out, and avoid tax hikes on working people to prop up more people drawing a full pension.”

According to its research, 395,000 people under the age of 35 have cleaned out their super accounts, with industry funds siphoning out $10.3bn of the total $17.1bn already paid to members.

Cbus chief executive David Aitkin on Tuesday said the sector must not be treated as an automatic teller machine, and that verification processes to access the scheme should be intensified.

ISA noted states and territories that have a greater reliance on tourism have experienced a larger proportion of funds accessed.

According to ISA, 20 per cent of Queensland’s workforce have requested withdrawal payments, 19 per cent of Northern Territory’s working population has accessed the scheme, while Western Australia has had 16 per cent of its workers claim hardship. The Australian average is 15 per cent.

The federal government initially estimated 1.65 million Australians would request payment and would cost the system $27bn.

As at June, 2.4 million people had lodged applications with the Australian Taxation Office.