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COVID superannuation withdrawls could cost billions

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Three million Australians withdrew $38 billion from their superannuation during the COVID-era, with Super Members Council of Australia warning the next generation of taxpayers are the ones most likely to foot the bill. 

New analysis shows Australian taxpayers could face $85 billion in higher pension costs, with those who withdrew their savings, needing to rely more heavily on government support in retirement. 

All of today’s 20-year-olds are projected to pay about $3,000 more tax to cover the higher pension bill caused by the scheme. 

Modelling by the newly-formed Super Members Council (SMC) shows that a 30-year-old who withdrew $20,000 from super could be left with about $93,600 less at retirement by the 2060s. 

Super Members Council CEO Misha Schubert said the financial toll of the early release scheme would cost both the people urged to withdraw their super and all Australian taxpayers for decades to come. 

In the early stages of the COVID pandemic, before government assistance kicked in with JobKeeper, many Australians were encouraged to sacrifice their retirement savings to support themselves,” she explained.

“Tragically, that will now leave many people significantly poorer in retirement. 

“Those withdrawals will also cost the next generation of taxpayers in a case of fiscal long-COVID.  

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

“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.” 

By May 2020 the ATO had approved 757,000 applications, worth $6.3 billion, for early release of superannuation.

Approximately 725,000 Australians effectively wiped out their superannuation accounts – of these, 45% were aged 25 and under, and 70% were aged 30 and under. 

The SMC has called on the Australian Government to enshrine super’s purpose in law.  

The group’s Objective of Super Legislation is before Parliament this week. 

“Ask Australians what super is for, and they’ll tell you it’s their money for retirement.  

“We strongly support the legislation. It will ensure super stays strong and secure – and continues to deliver a financially secure retirement for millions of everyday Australians.” 

The SMC says other proposals have also been discussed recently, including using super for a house deposit, to meet every-day cost of living expenses, purchasing household electric appliances, and to pay off HECS and other debts. 

The Super Members Council supports the Australian Government’s proposal to enshrine the purpose of super in law.  

The legislation says super’s role is to preserve savings to provide income in retirement in an equitable and sustainable way. 

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