International pension body, the World Pension Alliance (WPA) has warned of the dangers of governments allowing unrestricted withdrawal of pension savings in response to the COVID pandemic.

Concerned by moves afoot in both Chile and Peru to extend COVID withdrawal schemes so that their citizens have unrestricted access to their pension savings, the WPA – which represents pension plans and providers across Europe, the United States of America, Canada, Latin America, and Australia – has sent an International Federation of Pension Fund Administrators (FIAP) endorsement to the OECD about the devasting impact this would have on the retirement security of millions of people.

The WPA is calling on all governments to consider the consequences of the early release of pension savings from defined contribution accounts as a pandemic response, especially unrestricted withdrawal amounts and unconditional access to defined contribution accounts.

WPA president, Eva Scheerlinck who is also the CEO of the Australian Institute of Superannuation Trustees (AIST) said while the WPA appreciated the enormous impact of the COVID pandemic on the personal finances of millions of individuals, allowing unrestricted and early withdrawals of pension savings would likely do more harm than good.

“Unrestricted withdrawal of pension savings intended to provide retirement income without repayment will undermine the retirement security those funds are intended to provide,” Ms Scheerlinck said. “This will only aggravate the situation of these workers in their old age, since they will suffer from greater financial fragility at the time of retirement.

In its letter to the OECD, the WPA notes that the success of pension systems is closely aligned to the prevalence of strong institutions and committed governments, and that “this is a time to strengthen private pension savings systems as a means to properly diversify the sources for pension financing, not disband them as is currently proposed in Chile and Peru.”

Do you think the Australian government made a mistake in allowing people early access to their superannuation in Australia? Do you think the scheme might have to be brough back given the situation in NSW?