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Back to bite us: Super cash spent during Covid leaves $85b black hole

Up to $85 billion in extra taxpayer funds will needed by the end of the century to support those without enough super after millions of Australians tapped into their accounts early during the pandemic.

Mar 01, 2024, updated Mar 01, 2024
Retirees will become less of a financial burden on government coffers as superannuation kicks in. (AAP Image/Bianca De Marchi)

Retirees will become less of a financial burden on government coffers as superannuation kicks in. (AAP Image/Bianca De Marchi)

Analysis from the Super Members Council, which mainly represents industry super funds, found the early release scheme could cost taxpayers between $75 billion and $85 billion by 2085.

The higher costs to government coffers are expected to come from people drawing down more heavily on the pension as well as lower superannuation tax receipts.

Participants will also pay with less money in retirement, with a 30-year-old who withdrew $20,000 from their super during the pandemic left with about $93,600 less at retirement based on numbers crunched by the council

The scheme was introduced by the Morrison coalition government almost four years ago in the early stages of the COVID-19 pandemic.

Working-age Australians were allowed to withdraw up to $10,000 from their super accounts by June 30, 2020, and by another $10,000 from July 1 after meeting certain criteria relating to their work, including being made redundant or having hours cut.

The program, brought in before JobKeeper government assistance started, was designed to support those whose work and earnings had been hardest hit by the pandemic but was met heavy criticism from the opposition and super industry at the time.

Super Members Council chief executive officer Misha Schubert said the withdrawals would cost the next generation of taxpayers “a case of fiscal long-COVID”.

“These are the devastating consequences of schemes that break super’s preservation rules,” she said.

“People are left with far less money at retirement, and the next generation – our children and grandchildren – will have to pay higher taxes to pick up the bill for higher pension costs.”

The research was prepared to accompany the group’s submission to the Albanese government’s push to legislate an objective for the super sector.

Part of the intention of the new definition is to “preserve savings” for retirement and help safeguard against early access schemes in the future.

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