The scheme allowing early release of superannuation due to COVID-19 has driven net superannuation contributions negative for the first time.
According to APRA, quarterly net superannuation contributions – super contributions less benefits paid – have gone negative for the “first time since compulsory superannuation was introduced”. For the June 2020 quarter net super contributions were negative $2.3 billion.
This has been driven by a spike in withdrawals from superannuation. Total benefit payments increased by 77.7% compared to the March 2020 quarter, or 82.7% compared to the June 2019 quarter, to $37.4 billion. Meanwhile contributions have been relatively steady – while they increased by 17.0% compared to the previous quarter, they are only up 5.2% compared to June 2019.
APRA says the increase in benefits paid “reflects a spike in lump sum payments caused by the Early Release Scheme that commenced on 20 April”. This scheme expanded the ability to access superannuation due to hardship in response to COVID-19.
Treasury initially estimated that $27 billion would be withdrawn due to the COVID-19 scheme. But the latest figures from APRA show $31.7 billion has already been withdrawn. The Government also intends to extend the scheme for another three months to the end of 2020.
Labor argued the negative contributions flow makes the “long-promised, legislated, and overdue Superannuation Guarantee increase more important, not less”. There is currently a heated debate, driven by Coalition backbenchers, about further delays to increases in the Super Guarantee rate.
“Now more than ever Australians need help to rebuild their superannuation balances,” said a joint statement by Labor Shadow Treasurer Jim Chalmers and Shadow Minister for Financial Services Stephen Jones.
Last week, Prime Minister Scott Morrison said, in response to a question, that the Government hasn’t taken a decision on the Super Guarantee rate. Morrison noted that “prior to the election it was certainly my view and I articulated that that those were legislated changes and increases and we had no plans to change any of those and that was certainly our view”. Though, also, that “COVID-19 has occurred, people’s jobs are at risk”.
“But I also note that this doesn’t come into effect until July of next year. So I don’t think there’s any undue haste that is needed here to consider these issues. I mean, I hope, I would certainly hope, and I am an optimist, that by May of next year that we’re looking at a very different situation,” said Morrison.
Labor is also calling for the immediate release of the Retirement Income Review – which the Government has had for over a month. Labor suspects the Review of being a “stalking horse” for a freeze to the Super Guarantee rate increases.