Early Release of Super (ERS) Update

AIST calls for government to top up low-income ERS recipients

The Australian Institute of Superannuation Trustees (AIST) has called on the Australian government to top up the superannuation account balances of those earning less than $39,837 per year and have accessed their superannuation genuinely under ERS. The top-ups would be about 25 per cent of the savings they withdrew from their account balance, with a maximum of $5,000 from the government. The top-ups would apply to those who withdrew the full $20,000. The cost would be several billion dollars.

AIST has made several recommendations in its supplementary submission ahead of the 2020-21 budget to mitigate the long-term financial impacts of the COVID-19 pandemic on the superannuation system. Based on analysis from Mercer, the impact of ERS and reduced superannuation contributions is sitting at over $100 billion.

AIST is also recommending that the superannuation co-contribution rate and threshold be increased, the removal of the $450 minimum super guarantee threshold and super paid on parental leave. The gap without these measures put into place are the largest for women, young people and lower-income earners.

Many ERS applicants not eligible

New research has found that about 38 per cent of ERS applicants did not see any drop in income during the pandemic, making them ineligible. The scheme has driven spending but was not used as intended by many withdrawers. The research looked at data from over 10,000 Australians who withdrew funds and what they spent it on. The Australian Tax Office (ATO) doesn’t require any documentation to prove income loss during the application process.

Money was spent quickly, with almost half of the money withdrawn spent in the first two weeks. Around $7,500 was withdrawn on average, with about $3,600 spent in the first fortnight, compared with what was normally spent in a fortnight. Almost 65 per cent of this money was spent on clothes, furniture, restaurants and alcohol.

According to the most recent figures, over $3.1 billion has been removed from retirement savings since the ERS scheme was created. Over the week to August 9, 88,000 applications were received by funds, with half of those initial applications and half repeat applications. There are now over three million initial applications and 1.1 million repeat applications since its inception. Over four million payments have been made by superannuation funds.

Over 600,000 members lose insurance after ERS

Over half a million superannuation fund members are going to lose their life insurance after using the ERS scheme, research has found. DEXX&R’s Market Projections Report projected that total group insurance premiums for the year would fall by $226 million by December 2020 with continued super withdrawals. As member account balances fall beneath threshold for default life insurance deductions, cover will be lost. While this negatively affects members who lose insurance, it also means group insurance premiums will flatten out for some time, as member balances rebuild to default insurance levels.

ERS referred to Auditor-General

The Labor party has referred the ERS to the Auditor-General, saying the scheme has administrative failings. Shadow Assistant Treasurer Stephen Jones sent a letter to Auditor-General Grant Hehir requesting a review of the integrity and performance of the scheme. Jones lists a number of issues, including theft and fraud, a lack of verification mechanism for accessing funds, inaccurate and misleading promotion of the scheme, and enormous amounts of money being withdrawn, above and beyond expectations.

Police charge ERS scammers

The Australian Federal Police (AFP) have charged three more people with allegedly submitting false claims to gain early access to superannuation, with seven people charged in total. AFP Taskforce Iris has alleged that the group submitted multiple fraudulent applications under names that were not their own, for payments worth over $113,000. Search warrants were served at five addresses in South East Queensland.