The wave of shellshocked Australians tapping their super to weather the coronavirus recession has prompted Treasury to drastically revise up its forecasts.
And with stimulus payments to roll back from September, new findings from financial comparison website RateCity, seen exclusively by The New Daily, reveal most participants plan on drawing down their super twice.
Of those surveyed, 12.5 per cent had accessed their super before July – and two-thirds of that group intended to follow up with a second withdrawal this financial year.
Adelaide security guard Paul Birdsey is among them.
Although the company he worked for qualified for JobKeeper, he found the decision to draw down $10,000 from his account in April a “no-brainer”.
That’s because his income had been slashed by $500 a fortnight while working a heavily-reduced number of shifts.
With his nephew and retired cousin relying on his wages to help pay for living expenses and household bills, surviving on a reduced wage for an “unknown period of time” was a risk too great to bear.
“It was either I live on the street or get $10,000 worth of free super,” Mr Birdsey told The New Daily.
After joining website-crashing queues to lodge a second application on July 1, his withdrawn super now covers his gap in income.
Even if my employer rang me up today and said I’m back on my full-time roster, I would still consider keeping [the super] aside, because now more than ever, who knows what may happen,” Mr Birdsey said.
Most members chose to clear their debts
RateCity’s survey found around half of those who withdrew their super, like Mr Birdsey, used their funds to continue meeting household bills and 34 per cent paid down personal debt, including credit cards.
RateCity research director Sally Tindall said recent RBA figures that highlighted credit cardholders were using withdrawn super to clear their debts in record numbers was a major positive.
However, one important question remains: Will they be able to stay on the straight and narrow?
“The big concern is with a clear credit card for the first time in years, they may see this as an opportunity to rack up more debt,” Ms Tindall told The New Daily.
“But for many people, there is no alternative [to withdrawing super] – it’s a cold hard reality of the financial situation they find themselves in, but it’s worth having a plan as to how to spend that sum of money wisely.”
Banking transaction data analysed by credit bureau illion and economic advisory firm AlphaBeta last month showed of those who cracked their nest egg early, members had spent 64 per cent of their withdrawals on non-essential items, including clothing, alcohol and gambling.
APRA’s latest figures show more than $28 billion has now been wiped from the superannuation industry, surpassing the government’s early figures with five months left to run on the scheme.
Industry Super Australia (ISA) estimates more than 560,000 Australians have completely wiped their balance since April.
Australian Institute of Superannuation Trustees CEO Eva Scheerlinck said the scheme has proven to be “expensive for individuals and cheap for the government, when it really should be the other way around.”
Calls for eligibility to be tightened
Grattan Institute program director of household finances Brendan Coates told The New Daily the rampant take-up of the scheme highlighted gaps in the government’s stimulus payments, including flat JobKeeper and JobSeeker rates and strict eligibility criteria.
While the scheme bolstered consumer spending power, he said the ATO should now place emphasis on only paying out superannuation to members who genuinely need income boosts.
“We now have time to ensure that those accessing the scheme are in fact eligible to do so, because those who desperately need the money and are receiving it is a reasonable public policy outcome,” Mr Coates said.
“It would be perfectly feasible for the ATO to verify individuals’ incomes or for applications to show they meet the conditions of hardship to access the scheme for a second time.”
Mr Coates said the hit in retirement income by taking out the maximum $20,000 could be offset by more than half because those members would receive higher Age Pension payments.
However, ISA chief executive Bernie Dean noted those costs would be paid for through higher taxes.
Although acknowledging much-needed funds have been delivered to struggling Australians, Mr Dean said it’s “critical” the program is discontinued after December.
“It’s really important that this is the end of it because we need to have policy stability if members’ balances and the economy are going to get growing again,” Mr Dean told The New Daily.
The New Daily is owned by Industry Super Holdings