Addressing the Senate standing committee on economics last week, Industry Super Australia deputy chief executive Matthew Linden said the group understood around 5 per cent of total early release claims so far had seen super accounts fall to zero.
“Across the entire scheme that’s my understanding, that 50,000 accounts [were emptied],” Mr Linden said.
“As the scheme is still operating people are making more claims, so those numbers will increase over time.”
Mr Linden said while this was “disappointing” for workers that would “lose the opportunity for compound savings”, it would also have a fiscal impact on super funds whose member bases would shrink as a result of the scheme.
Added to the costs involved in establishing the payments system for the scheme, Mr Linden said the current cost pressures on funds were intense, but that it was unlikely this would filter through to higher member fees.
“In terms of costs, in the scheme of things I’d expect the prospect of fee impacts to be low – there’s other factors at play and I think trustees will do everything in their power to keep a lid on fees,” he said.
Industry Super chief executive Bernie Dean said the statistics around zero-balance funds presented an argument for an increase in the super guarantee as soon as possible, given younger workers would need higher compulsory contributions to gain back some ground on retirement savings.
“This is no cause for celebration that tens of thousands of young Australian workers have emptied their savings accounts,” Mr Dean said.
“How do you think those young people are going to recover the savings needed in the early part of their working life so they’ve got a meaningful nest egg and are not reliant on the pension?
“An increase in SG contributions over the next couple of years is going to be a main driver to helping those young people recover their balances.”
Mr Dean also dismissed concerns of potential super fund fee increases, saying “let’s focus on helping people recover their balance, not whether that is going to add fees to anyone”.
I hope all those who had cleared their super use it for something practical such as saving for a house or investing in stocks. That’s what I would have done if I had the opportunity to access super early. Use it for something practical.
I don’t agree with that article, if “young Australians” are stupid enough to empty their super fund balance then I say let them live with the consequences that come from it! Why should anyone else, especially employers, be forced to pay for their hasty decision to squander their retirement savings with impulse!?!
You can’t blame the people accessing the super you have to blame the government for allowing this to happen and opening up that door they never should have allowed early access for super due to this crisis, now it sets a precedent whenever their is a economic crisis I can just tap into my super, people will start viewing super as savings account because of this
Fees are pretty low as they are now. Just $1.50 per week according to Hostplus in big bold letters on their website. These Industry super funds have been hiding fees for years so pretty sure they’ll find away to pass on the additional administration cost of managing 50,000 accounts making zero profit. Does a Trustee have a fiduciary obligation to close those nil balance accounts as opposed to the wider members paying for those costs?
“Industry funds have been hiding their fees” Seriously, have you been hiding in a cave for the past few years. It was the banks and retail funds that were the ones caught charging fees for doing nothing.
Yeah it’s called the reserve pool, they will just take it fr there.
I imagine the insurance for these 50,000 accounts will now be gone if the account balance is zero and premiums can’t be paid. Whether or not their insurance was sufficient (before the early release), it would have been better than nothing – which is what they now have.
Exactly….empty your super account to zero….no insurance….have a major accident or illness and cant work again in any occupation…….no insurance left…..younger people left to be cared for life by aging parents without any insurance proceeds to assist them in funding a life long financial commitment…ends up then draining the retirement proceeds of parents to care for their disabled or long term unemployed child/dependent.
No advice provided because ASIC reckon that $300 is more than enough for an adviser to charge…….no advice provided because they could just apply via ATO and bypass any guidance….no advice provided by fund because they are just instructed by ATO to release funds.
I understand that financial priorities are important, but some of these withdrawn funds could have simply been pumped through Dan Murphy’s, used to buy some mag wheels for the car, used to buy a puppy, used to upgrade a gaming console, used to buy drugs, with no boundaries on how it could be spent.
Other people could use the funds to book their next cruise on the Ruby Princess !
Anonymous, sure some will spend it at Dan Murphys, but the reality is that most people would be using it to live or at the very least give themselves a buffer until they can go back to work.
What they now have is full personal responsibility for their own insurance, rather than a misplaced reliance on default super insurance which is never the right type or the right amount. I think that’s an improvement.
Funny how all the riskies say how useless group insurance is, but when people empty their super and lose their group insurance it is all of a sudden a big problem.
I’m not a risky. My post was just a thought on the broader consequences of early withdrawal / account closures.
Good luck with the FASEA exam.
Because something is better than nothing. The successful claim rate for group insurances is quite high, so hence the concern when a member loses their insurance. Any Risky will know this.
A significant number would be less than $6k or be under 25 with the government deciding in its wisdom that poor young people don’t need insurance. In other words most wouldn’t have had insurance anyway.
The fact is we don’t know how many accounts closed were in the three categories; a) Inactive low balance < $6k with the ATO (no insurance), b) MySuper with insurance opted-in or out and c) Active with default or custom Insurance attached. Average withdrawal was over $8k - in a down market. So saying "most" is a guess as we don't have the data.