More than $3.8 billion has been drained from the retirement savings of West Australians
Almost 70,000 West Australians have effectively wiped out their super balances as the state’s workers have withdrawn $3.8 billion from their retirement nest eggs, sparking fears future pension costs will soar.
New Industry Super Australia analysis estimates West Australians have made more than 498,000 applications via the early release of super scheme, withdrawing on average $7,948 per application – the nation’s highest.
About 24% of the state’s workforce have raided their retirement early, placing it third behind Queensland 30% and the Northern Territory 28% – overall 23% of Australia’s workers have accessed super early.
The top three federal electorates by withdrawals were Durack $296.9 million, Perth $289.4 million and Swan $286.1 million. (see each WA electorate in the table below.)
In April the government broke open super’s preservation rules allowing Australians who had lost their jobs or had hours reduced to access $10,000 in super before July 1 and a further $10,000 until December. The government now estimates $42 billion would be withdrawn from super, a dramatic increase on its initial $29 billion forecast.
The radical early release scheme was supported by the industry as a temporary measure to provide emergency funds to members during a global pandemic and once in a 100-year downturn, but it is critical it comes to an end in December and not further extended at the upcoming federal budget.
This scheme will add tens of billions to the cost of the aged pension, heaping pressure on future governments to hike taxes, extending the scheme will increase taxpayer pension costs exponentially, while for individuals it will leave them tens of thousand less in retirement.
A 30-year-old who withdraws $20,000 could have between $40,000 to $80,000 less retirement income, while still adding up to $50,000 to the overall cost of the age pension. A 30-year-old couple could be up to $120,000 worse off in retirement, while adding between $60,000 and $100,000 to the age pension.
Now as the country’s health crisis has improved, and the economy begins its march to recovery, there is no reason to continue the emergency early access to super scheme. For those doing it tough, there are existing hardship provisions which are a more appropriate scheme to get funds to members who had fallen on hard times.
With billions withdrawn from super and 69,000 West Australians effectively wiping out their balance, the legislated increase in the super rate even more important than before to stick to the legislated increase in the super rate – the SG is scheduled to rise to 10% next year and 0.5% every year after until it reaches 12% by 2025.