The government’s early release of superannuation scheme, which was introduced to help people deal with the financial impact of the COVID-19 pandemic, closed at the end of last year, but the world pension body has warned that such a scheme should only ever be used as a matter of last resort.
While Australia wasn’t the only country around the world to allow early access to its registered pension scheme to help people cope with the pandemic, there were some countries such as Canada that resisted the urge.
The World Pension Alliance (WPA) warned that early withdrawal of superannuation savings should only ever be a temporary measure of last resort.
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The WPA warning is contained in a new report on how pension funds around the world dealt with the challenges of the pandemic.
The report highlights that while COVID saw some countries allow pension fund withdrawals, such schemes “should not be considered as an alternative for obtaining short-term resources”.
“One can consider withdrawal of pension funds due to an exceptional situation, but only as a temporary measure of last resort,” the WPA noted. “And withdrawal must be accompanied by clear and explicit mechanisms for recovering withdrawn funds.”
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Australian Institute of Superannuation Trustees (AIST) chief executive Eva Scheerlinck, who is also vice chair of the WPA, said the report highlighted how the pension fund response to the COVID crisis varied considerably from country to country and across pension type.
The withdrawal scheme in the United States allowed for up to US$100,000 to be taken from funds, while other schemes limited withdrawals to 10 per cent of savings.
The Australian scheme allowed individuals to withdraw up to $20,000 in two tranches and saw more than one-third of the Australian workforce withdraw $36 billion in early release super.
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AIST has called for the upcoming May Federal Budget to include a one-off government contribution to the super accounts of low-income earners who accessed their super early and met the eligibility criteria.
The contribution would be based on the proportion of the balance withdrawn and would be no more than $5000.
“Addressing the COVID super gap will not only ensure Australians aren’t penalised in retirement for a crisis that they had no control over, it will also reduce the extent to which they are required to rely on the taxpayer-funded age pension in retirement,” Ms Scheerlinck said.
In other superannuation news, Ms Scheerlinck called on the government to prioritise making super assets visible in family court proceedings in the wake of the welcome move to abandon a controversial measure that would have enabled victims of family violence to access their super early.
The proposed data-sharing scheme was announced by the government in its 2018 Women’s Economic Statement but remains unimplemented.
This follows the Women’s Legal Service Victoria report, which identified that the lack of visibility of super assets during family law proceedings was exacerbating the financial hardship experienced by many women.
The data-sharing scheme will make superannuation assets more visible when they are going through the family law courts by allowing the sharing of superannuation data between the courts and the Australian Taxation Office (ATO).
Ms Scheerlinck said the superannuation industry and women’s advocates have been calling on the government to urgently implement the data-sharing scheme to improve the financial wellbeing of victims of financial abuse as superannuation was often their biggest – or only – asset in these relationships.
“Family violence victims and financially disadvantaged women have struggled for far too long to gain access to their partner’s super balance details during separation or divorce proceedings,” Ms Scheerlinck said.
“We urge the government to push ahead and prioritise the data sharing scheme now it has made the decision to abandon the other measure.
“Allowing the courts to access ATO data is a simple measure that will make the process far more efficient, fair and cost-effective both for the individuals concerned and the super industry, and will help close the gender super gap for the most vulnerable women.”
Did you access some of your superannuation early during the pandemic? Do you support a super top-up for low-income earners?
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