The federal government’s early release of superannuation relief measure will cost future governments and taxpayers more than $100 billion, BetaShares has said.
Highlighting recent financial modelling conducted by the exchange-traded fund provider, BetaShares estimated the $30 billion withdrawn from superannuation funds since the COVID-19 relief measure was introduced would cost the Australian retirement system between $100 billion and $130 billion over the long term.
BetaShares chief executive Alex Vynokur said not enough thought had been given to the impact of early super withdrawals on the wider public and what it would eventually cost the government in additional pension payments.
In addition, Vynokur noted the government’s decision to extend the length of time in which people would be able to use the early release of superannuation relief initiative to the end of the year would worsen the situation.
“[The early release super scheme] was a well-intentioned but misguided policy from the start. The true cost of allowing people to access their super early will ultimately be paid by future Australian governments and taxpayers,” he said.
“We believe it is critical to examine what impact this policy will have on Australia’s retirement system, particularly after the recent decision by the government to extend the scheme to the end of the year. There is no doubt that extending the scheme will exacerbate the problem that the government has created.”
He pointed out younger Australians who had withdrawn their super early would be the worst hit by the long-term impact of the scheme, not only missing out on decades of compound interest but also having to eventually “foot most of the bill of one of the largest government debts this country has ever seen”.
Citing recent data from a survey conducted by Illion and AlphaBeta, he said the majority of people who accessed their super early under the relief measure had spent the proceeds in ways that were not consistent with the intention of the policy.
“Unfortunately, it is the least informed and the least financially literate that are in the most vulnerable position for opting in for early super withdrawal. As such, the scheme will further the gap between the haves and have nots,” he added.
“It has also damaged the educational effort in which the Australian government has invested over decades to highlight to Australians the importance of superannuation and long-term wealth accumulation.”
He warned the early super release scheme had ultimately undermined the importance of the superannuation system.
“I fear that going forward our superannuation system will become a tempting target to be used by governments, present and future, as an ATM to withdraw money to plug holes in the economy. Without proper governance, the early release policy has set a dangerous precedent,” he said.
