Australia’s superannuation savings are about to plummet

The federal government is set to allow small business owners and people who lose their jobs due to the coronavirus pandemic to access part of their superannuation savings. This comes as the Coalition is under growing pressure to relax the rules governing early access to super on health and financial hardship grounds in response to the crisis:

Politicians are already being inundated with emails and phone calls from the public who want to be able to draw on some of their share of the nation’s $3 trillion superannuation pool to cope with the coronavirus crisis.

The government is trying to balance the demand for cash from fund members, without threatening the liquidity position of super funds which have large amounts of money tied up in illiquid unlisted assets such as infrastructure.

Treasury and the Australian Prudential Regulation Authority do not want to trigger a redemption “run” on super funds.

The government is actively working on loosening strict existing financial hardship and health provisions that sometimes enable access to superannuation before the age of 65…

There is likely to be strong opposition from the influential superannuation industry on tapping into retirement nest eggs, because it could be viewed as a move by the Coalition government as undermining the compulsory savings system.

Australia’s superannuation savings will have already been battered by the circa 31% fall in the All Ordinaries Index (i.e. the biggest 500 companies on the Australian Stock Exchange):

Given the All Ordinaries index fell around 55% during the GFC, and this crisis is equally bad if not worse, superannuation balances face further devaluation from adverse sharemarket movements.

Add a wave of early withdrawals into the mix, and Australia’s famed “$3.0 trillion superannuation pool” is facing a massive hair cut.

Leith van Onselen
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Comments

      • keynesian Killa

        remind me…..what happened after the 87′ crash?
        Went the F right back up. As long as losses aren’t realised it is no problem.

        • You might want to look at a few charts before spouting off! All Ords took 6 years to get back to even, & IIRC, BHP & some other popular stocks of the time took 10 years….. Some need their money sooner than that.

        • Correct, the article even says so, perhaps the person who recommended a maths lesson should self-enrol in a reading lesson.

      • Not everything is in equities. Most are “balanced” portfolios which still will take massive hit. Also most balances are skewed to older Australians which will have more conservative accounts
        Might be total 30% loss by the end

      • Don’t forget to deduct the advertising spend the funds will put out opposing the scheme…

  1. As it should be. The government should not be using foreign debt before using domestic equity. Foreign debt will only dig our children a deeper grave. It’s a pity that fool Paul Keating didn’t realise that back in 85 when he let the foreign banks that had fueled the madness known as the Australian housing market.

  2. ErmingtonPlumbingMEMBER

    A predicable and frequently guaranteed outcome from any kind of non Government backed Privatized Old age Pension system who’s main purpose is Tax avoidance for the 1% and a Political gift to the rapacious, money for fking nothing, casino like, financial services Industry.

    • Hey man, if you’re not in Sydney you’re camping out. That kid Keating had all the cool lines.

    • I reckon it’s not out of the question. As far as measures the govt can do, letting people access their own money is pretty easy. Maybe a one off ability to take $100k out of your super (with no additional tax maybe). I’d do it.

      • Lenny Hayes for PMMEMBER

        I wonder what the real estate industry’s position on this would be ?. Zero transactions doesn’t benefit them so even forced sales would be a positive for their members.

        The Superfund mouth breathers would no doubt be dead against it.

  3. Wonder how margin calls are going to go with housing.

    Time for another round of 58yos who ‘equity mate’ed their way into a margin loan on a current affair complaining that the banks said it would be fine?

  4. they will try to take it all off balance sheet like they did with the GFC … SMSFs … not sure I suspect most feel smug as property, ya know, never falls …. that will be where the Armageddon hits

  5. Jumping jack flash

    They only plummet due to greed and stupidity.

    In my opinion as soon as they started using super to prop up the sharemarket after 2000, it was always going to have these kinds of problems.

    Oh, don’t get me wrong, its great when the economy is going well everything is fine and dandy.
    A bit like politicians, it doesn’t matter who’s in charge, and whether they do anything or not when the debt is flowing and growing, and the economy is humming along on the back of a gargantuan debt pile which basically sustains itself, but when the SHTF, it matters a lot who’s in charge, and similarly, it matters a lot what risks you’ve taken with your super.

  6. Can someone please explain to me the benefit of giving that cash to banking institutions over offering the cheap loans directly to Australians under a certain income bracket? Is it just for future election donations? Or their mates or what? Why pay the middle man who eagerly takes all the cream when times are good, but then gets to share all the pain of their losses with tax payers? Does that mean I will effectively have bank shares now and can share in all that ka-boom in profits further down the line? Can I now go to their meetings?