Net contributions to super drop for first time in era of compulsory super

Australians pulled more money out of super than they put in over the three months to June – the first quarterly drop in net contributions since the compulsory regime began in the early 1990s.

‘It’s their money’: Scott Morrison defended his government’s early release of super scheme during question time. Picture by Sean Davey.

Australians pulled more money out of the superannuation system than they put in over the three months to June — the first quarterly drop in net contributions since the compulsory super regime began in the early 1990s.

Benefit payments surged by 77 per cent cent to a record $37.4bn in the second quarter of the year, new statistics from the Australian Prudential Regulation Authority revealed, driven by the spike in lump sum payments as savers rushed to take advantage of the Morrison government’s COVID-19 early release of super scheme.

Lump sum payments accounted for $26.8bn of benefits paid in the quarter, while pension payments totalled $10.7bn.

Net contributions — contributions and net benefit transfers less benefit payments — fell by $2.3m, the data showed.

The new figures came as parliament on Tuesday passed legislation giving Australians powers to choose their own super fund, instead of being compelled to direct savings into a fund because of enterprise bargaining agreements.

Josh Frydenberg said the Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019 would “allow around 800,000 Australians to make choices about where their hard-earned retirement savings are invested, representing around 40 per cent of all employees covered by a current enterprise agreement”.

More than three million Australians have ripped $31.7bn out of their retirement savings since the introduction of the early access scheme, according to the latest APRA data, which allows savers to make two withdrawals, each worth up to $10,000, from their super accounts.

The scheme only requires applicants self-certify that they need the money to help assist them through the COVID-19 recession.

As millions of workers run down their savings, Scott Morrison has said he is considering delaying or scrapping the legislated lift in the compulsory rate from 9.5 per cent to 10 per cent in July next year.

On Tuesday, the Prime Minister in parliament defended the government’s early release of super scheme, saying Australians’ retirement savings “belongs to them because they work for it, they earned it, they saved it”.

“We are going to make sure they can get access to it,” Mr Morrison said.

The government is sitting on an unreleased 650-page retirement income review report, which is expected to detail the benefits and costs of the incremental rise in SGC from 9.5 per cent to 12 per cent between July 2021 and 2025.

Opposition Treasury spokesman Jim Chalmers said the fall in net super contributions through the June quarter “makes the long-promised, legislated, and overdue Superannuation Guarantee increase more important, not less”.

“Now more than ever Australians need help to rebuild their superannuation balances,” Mr Chalmers said. “The government must immediately release the review that they received over a month ago.”

Reserve Bank of Australia governor Philip Lowe and independent think tank The Grattan Institute have warned that lifting the rate of compulsory super will come at the cost of wages growth.