Fees-fi-fo-fum … ignore the ‘scary’ super giants

You have every right to take your super and spend it during the pandemic. Go ahead and crack open the nest egg.

What if “ordinary working people” want to save and spend their money as they please? Especially when they’re young and have pressing needs?

Dismal. That really is the only way to describe the feeling in Melbourne this week.

The city is under lockdown, meaning there’s nobody munching on movie popcorn, nobody rolling out the picnic rug, nobody swirling pasta around their fork in a sublime Italian restaurant — all of which is, of course, small beer, not that you can go out for beer — compared with the jobs lost, the wages cut and the businesses that must now close.

Some will go broke. Some people will, too.

The Morrison government is doing what it can to keep people afloat. JobKeeper is part of that, as is JobSeeker, as is the scheme that allows people early access to their super.

Which of these schemes have the punters loved best? Raiding their super. And oh, how the fund managers are bleating about it.

“Don’t raid your super! You’ll end up in the poor house. Sell your shares, dig into your savings, sell your children in the Facebook Marketplace, but whatever you do, don’t access your super.”

Is anyone listening? Not really, no. How do we know? Because the Morrison govern­ment’s scheme allowed Aus­tralians to withdraw up to $10,000 tax-free last financial year, and another $10,000 tax free this financial year.

And so, guess what happened on the first day of the new financial year?

The website for the Australian Taxation Office crashed, in part because of huge demand from millions of people conducting a second raid on their retirement savings. More than two million people have together taken $18bn, and counting.

Some people clearly have other options. They could dip into savings, or borrow from the bank, or even from their parents before they go near their super. Yet it’s to their super that they are going.

What, if anything, can we read into this? Could this be the first, concrete evidence that Australians don’t love compulsory super as much as they’re told to love it (mainly by Paul Keating)?

Could it be that they resent having money tied up for the whole of their working lives?

Could it be that they’d rather have that money now, instead of getting access to it just before they die and have to leave it to the kids?

Could it be that they resent also the billions in fees deducted each year?

Might they also be heartily sick of how woefully the funds perform?

Think about how super works: every working Australian must, by law, hand over a percentage of their income to a fund that then invests the money on their behalf. Most funds invest in safe stocks and property, which isn’t exactly rocket science.

For this service, the funds — and especially their executive teams — pay themselves magnificently. Last year, for example, they extracted $32bn in fees.

Depending on how much money you have under management, you could be paying the funds between $3000 and $5000 a year.

And what do you get for this? Even the top funds rarely chalk up more than a 5 per cent return, which really is woeful. So are we truly surprised to see punters taking a measly $10k or even $20k back while the option is open to them?

Now you are, of course, meant to be feeling some coronavirus-related financial stress before you dive into your super and grab some of your cash back. But how easy is that to prove, during a pandemic? Especially if you’re a freelancer, a sole trader or somebody who runs their own business? Of course your business is down. With luck, it will soon be up.

You also can take it as given that not everyone who is taking the money technically “needs” the money. How do we know? Because look at the retail figures: Australians are happily spending money on decking oils at Bunnings, and new white goods at Bing Lee, and that can’t all be coming from saving.

The super funds are furious, and they are trying to frighten people from taking any more of their own cash.

One egregious claim: a 20-year-old worker who withdraws $20,000 will be $120,000 worse off in retirement. That’s just scaremongering.

First up, how many 20-year-olds have $20,000 in super? Next to none. But let’s look at the case of the 30-something professional woman, who maybe does. Will she really be $80,000 or $100,000 worse off in retirement?

It very much depends on what she does with the money.

Nobody wants to talk about the upside of a young person taking their super: let’s say she pools her $20,000 with another $20,000 from her partner’s super, and they put that together with the first homeowner’s grant. They could start thinking about getting a home loan.

They’ll have their feet on the bottom rung of the property market. A home of their own. Ask any economist: nothing anchors and protects a person quite like owing their own home.

Or else, they could pay off their HECS, get that monkey off their back. They might even be able to think about having a baby. Or they could do as so many are obviously doing: extend and improve the home the have, increasing its value in the process.

Keating took a swing at super’s critics this week, saying it was designed for “ordinary working people … to give them a lift in later life”. But what if “ordinary working people” want to save and spend their money as they please? Especially when they’re young and have pressing needs?

It’s hard to get ahead when you’ve got tax to pay, and then your HECS debt, and then childcare, and private health insurance, and then super on top of that. And so, when the opportunity came along to grab some of that money back, young people voted with their feet: the under-40s have been twice as likely as the older age groups to access their super early.

And just this once we can say: good for them.