Submission #2 – Senate Economic References Committee inquiry into improving consumer experiences, choice, and outcomes in Australia’s retirement system

This is the second submission of the Super Members Council (SMC) to the Senate Economics References Committee’s inquiry into the improving consumer experiences, choice, and outcomes in Australia’s retirement system.

Executive summary of the submission:

• A strong evidence base supports the preservation of retirement savings and confirms the negative effects of breaking the seal on super.
• The negative effects of breaking that seal would be felt by millions of everyday Australians with retirement savings in super – including the current generation of retirees.
• New SMC analysis shows keeping super preserved and purchasing a home two years later delivers people better lifetime wealth than proposals to allow early access to super to bring forward that house purchase.
• Analysis by SMC shows a couple who withdraws $55,000 at age 30 and achieves homeownership 2-years earlier would have $165,400 less in lifetime disposable income, driven by higher housing costs.
• An increase in housing costs leads to lower working-life disposable income after housing costs of $57,800.
• It would also lead to a lower superannuation balance at retirement of $149,000. This would mean lower superannuation earnings and benefits of $164,300 during retirement, and lower disposable income of $107,600 in retirement (the Age Pension buffers to some degree the lower superannuation benefits), and higher Age Pension entitlements of $87,600.
• A comprehensive independent policy roadmap for improving national housing affordability recently released by the National Housing Supply and Affordability Council, did not include early access to superannuation in any part of its policy roadmap. Rather, the central thrust of its recommendations to resolve affordability to was to address the urgent issues of housing supply.
• Other proposals for using superannuation to help purchase a home have been raised, including proposals to use super in a mortgage offset or using super as collateral for a loan. Analysis by Lateral Economics shows that these proposals would have system-wide costs including reducing the returns of super funds due to liquidity requirements, and would cost customers more than they would save them, rendering them impractical.