Universal super critical to shield young Australians from long-term economic ravages of COVID-19

14 August 2020

Universal super critical to shield young Australians from long-term economic ravages of COVID-19

Superannuation has played an important role in supporting millions of Australians hardest hit by the economic crisis by providing over $30 billion in temporary financial hardship relief.

However, The Association of Superannuation Funds of Australia (ASFA) warns that many young Australians face long-term financial hardship and the legislated move to 12% superannuation guarantee (SG) is now critical to protect this generation from the long-term consequences of COVID-19.

“If today’s young people are to avoid ending up on the Age Pension, every single dollar contributed to superannuation counts,” said ASFA Deputy CEO, Glen McCrea.

Around half a million Australians have emptied their superannuation accounts by accessing the Federal Government’s early release of superannuation scheme – the majority being under 35 years old.

Many of these young Australians now face a sustained period of unemployment as the economic impact of COVID-19 continues to disrupt Australia’s financial and economic conditions.

ASFA modelling reveals the cost at retirement for a typical 25 year old woman, who has accessed $20,000 in early release super now, could be as much as $85,000, if she is unable to secure employment and contribute superannuation for two years.

“Young people, those aged 20-29 are the generation that will need superannuation the most. The Government’s own modelling outlined in the last Intergenerational Report paints a bleak picture of 2050: fewer taxpayers, less money available for Age Pensions and significantly more older Australians to support.

“Lifting super to 12 per cent of wages will mean more people in retirement can afford decent aged care. It’s not fair that young people should suffer the devasting impact of COVID-19 now and then also be forced into poverty in retirement by relying solely on the Age Pension – we are better than that.”

Recent research from ASFA found that Australia’s compulsory superannuation system has delivered a long-term boost to households’ savings and retirement outcomes and is of extraordinary benefit to low-income earners, and young people, in particular.

“Australia’s retirement system is the envy of the modern world. We can keep Australia as a great place to live, work and retire but not at the expense of younger Australians – not by robbing Peter to pay Paul.

“Everyone deserves dignity when they retire regardless of age, sex or income – it is the Australian way.”