Thousands of Australians could be in for a windfall after applying to withdraw up to $20,000 from their superannuation accounts early under new laws.
As part of the government’s coronavirus rescue package, workers are able to access their supers to help them stay afloat during the economic downturn.
Experts fear the total drawn from the nest egg pots could eventually top $50 billion, while the government estimated a more modest $27 billion.
It could be good news for savers, particularly those who have lost work due to the restrictions imposed to protect the public from the COVID-19 pandemic.
But it may also put pressure on small funds with limited cash, forcing them to sale assets.
People are seen waiting in line at the Centrelink office in Palm Beach on March 23 (pictured) as many Australians feel the pinch of the COVID-19 economic downturn
In the first week of the new scheme, around 600,000 people expressed their interest in drawing thousands from their accounts.
Ordinarily, strict rules block people from accessing their superannuation until they hit retirement age of between 55 and 60.
However, people who withdraw now would not only lose this money from their retirement funds, they would redeem it at a time when share markets have plunged, forcing them to sell at a loss.
According to an industry memo seen by The Australian, the Australian Taxation office was contacted by 617,800 workers who registered interest to withdraw up to $10,000 before July.
They would then look to withdraw up to a further $10,000 between July and October.
The government predicted that 1.3 million people would ask for early access to their pots, but this could easily be eclipsed – as the scheme has already been inundated.
Known as an early drawdown scheme, it will be running from April 20, but people are allowed to express an interest now.
‘In terms of the number of people registering, this should be used as a high level indicator of volumes of those who may eventually apply for early release of their super only,’ the ATO said.
Prime Minister Scott Morrison announced the measures as part of a second stimulus package on March 22, surprising the superannuation industry by allowing people to access their super early.
Treasurer Josh Frydenberg said workers and sole traders could withdraw the money if the number of hours worked or their income fell by 20 per cent or more due to the coronavirus.
The early release also applies to welfare recipients who qualify for the coronavirus supplement.
Details of the requirements you must meet to access your superannuation early are at the Treasury website here.
French nationals queue to enter Sydney airport to be repatriated back to France on April 2 (pictured) amid the COVID-19 pandemic.
Known as an early drawdown scheme, it will be running from April 20, but people are allowed to express an interest now, giving them access to up to $20,000 from their super accounts
This initiative builds on existing provisions that allow early access to super in the event of hardship or on compassionate grounds, and it is estimated to put up to $27 billion dollars of superannuation back into the pockets of hardworking Australians,’ the Treasurer.
But it may not be the best time for all Australians, as the accounts are likely to have dropped in value.
Share markets have dropped more than 30 per cent since February and destroyed trillions of dollars worth of value worldwide.
Opposition Leader Anthony Albanese told Sky News it wasn’t the best time to withdraw money from superannuation.
‘Superannuation is one of the things that’s a ballast for our economy, it provides us stability, and what I wouldn’t want us to see is either people essentially missing out on a large part of their retirement incomes or for the super industry as well,’ Mr Albanese said.
‘Now’s not the time to be selling those assets.’
Mr Albanese warned of potential fire-sales if the big super funds started selling assets.
Australians had $3 trillion in superannuation as of December of which $1.9 trillion had been invested in various instruments, the Association of Superannuation Funds of Australia said on its website.
Of that $1.9 trillion, 51.4 per cent was invested in equities both Australian, international and unlisted.
The remainder was in fixed income, cash, property and infrastructure.