Australians could have a harder time accessing their super before retirement age under new laws proposed by Labor.
During a speech on Monday, Treasurer Jim Chalmers suggested changing retirement savings laws after Scott Morrison’s coalition government allowed workers to raid up to $20,000 from their super – through two $10,000 installments – to protect against Covid during the early months of the pandemic.
Dr Chalmers called the early release a ‘debacle’ that forced ‘Australians’ to choose between ‘better income in retirement or paying their bills’.
‘Never again,’ he said. ‘Our government will take a different stand’.
In 2020, Australians withdrew almost $36 billion from their superannuation funds as lockdowns caused the first recession in 29 years – with many workers using the money to pay off their mortgages and bills and buy shares.
The super raids marked the first mass withdrawal of retirement savings since the mandatory super debut in 1992.
Australians will be barred from accessing their super during an emergency, as they did during the start of the pandemic (pictured is a Centrelink queue in Southport on the Gold Coast in March 2020)
The Liberal Party also went with a policy at the last election to allow Australians to take $50,000 out of their super to buy their first home, but Labor under Anthony Albanese strongly opposed that plan.
Dr Chalmers said the early withdrawal of the Arabs was a ‘disastrous policy’ of the former coalition government.
‘We will move to end the Great Wars once and for all,’ he said.
‘The most disastrous policy proposals we’ve seen in recent years – such as allowing billions to be withdrawn from balances during the pandemic – were partly because our predecessors were navigating the super landscape without a compass.’
The Labor government will now work to introduce into law a definition of superannuation to safeguard retirement savings.
‘And ensure that future changes to the system are consistent with its purpose,’ Dr Chalmers said.
‘To do this it is necessary that we enshrine the purpose of super into law.’
The Treasurer said legislating the definition of super would provide certainty and signal to superannuation funds that their strategy should be aimed at prudent long-term investment, not short-term returns to satisfy early withdrawals.
The proposed definition is: ‘Super aims to preserve savings whilst providing government support as well as income for a dignified retirement in an equitable and sustainable way’.
Dr Chalmers told a Sydney forum on Monday that former Treasurer Josh Frydenberg’s Covid assessment policy ‘made us vulnerable to wrong turns and wrong decisions’.
Australia’s superannuation system is facing a major overhaul, with Anthony Albanese’s government considering ways to stop the early release of superannuation money.
‘It took us further away from where we should be – a better standard of living in retirement for as many Australians as possible.’
The government will release a consultation paper to seek feedback on their proposed reforms to boost the $3.3 trillion super sector.
‘In my view, defining the function of super as providing income for retirement is not to reduce the role of super in our economy, it is to elevate it, and broaden it,’ Dr Chalmers said.
‘A greater focus on distribution for members requires that the Fund always invest in a manner that secures the right risk-reward profile.
‘As an industry, you are in the long-term investment game.’
Former National Deputy Prime Minister Barnaby Joyce criticized Labor’s idea of restricting early access to super.
“They want to buy their own house, many people want to have their own business,” he told Sunrise.
‘Retirement is a great programme, but I don’t think you should be denying people access to their own money.’
As Liberal PM, Mr Morrison campaigned ahead of the May 2022 election to allow Australians to access up to $50,000 of their super to buy their first home.
It would have allowed first-home buyers to invest up to $50,000, or 40 percent of their retirement if they saved for a deposit of at least five percent.
The Liberal Party’s electoral policy had no cap on the value of the house and if the coalition had been re-elected for a fourth term it would have been available for a brand new or existing property.
Australians born after July 1, 1964 must wait until age 60 to access their super.
During a speech on Monday, Treasurer Jim Chalmers (pictured with wife Laura) retires after Scott Morrison’s coalition government allowed staff to raid their super in two installments of $20,000 during the start of the Covid pandemic Suggested to change the savings laws.
Apart from epidemics, early release super is only allowed in very limited circumstances, in which someone is permanently disabled.
This is known as ‘disability super benefit’.
A super fund must be satisfied that a person has a permanent physical or mental medical impairment that may prevent this person from re-working in a job for which they were qualified.
Compulsory retirement was introduced in 1992 when Paul Keating was Labor Prime Minister.
While trade union membership has fallen during the past three decades, unions have remained active investors with industry super.
The compulsory super rate is set to increase from 10.5 per cent to 11 per cent from 1 July 2023 and by half a percentage point each year until it reaches 12 per cent in July 2025.