“This comprises less than 1 per cent of the $3 trillion in superannuation today,” Mr Frydenberg said.
“The prudential regulator, APRA, has advised it will not have a significant impact on the industry overall.”
But accessing these funds will mean locking in double-digit declines in some superannuation balances over the past few weeks following a savaging of global sharemarkets because of the pandemic.
Opposition Leader Anthony Albanese said on Sky News it was “not the best time for individuals to be withdrawing money from superannuation” because of these share price falls.
“The fact is that superannuation is one of the things that’s a ballast for our economy, it provides us stability, and what I wouldn’t want us to see is either people essentially missing out on a large part of their retirement incomes or for the super industry as well,” Mr Albanese said.
He also warned that there would be “firesales” if the superannuation industry started selling assets, adding they are the major shareholders in Sydney, Brisbane and Perth airports.
“Now’s not the time to be selling those assets,” he said.
Labor is expected to vote in favour of the legislation but senior sources said significant issues would be raised with the government about the proposal. In particular, there are concerns about upcoming changes from April 1 that mean insurance policies would be cancelled when super balances fell below $6000.
Association of Superannuation Funds of Australia chief executive Martin Fahy said the government’s measures were significant.
“Early access to retirement savings should only occur under extenuating circumstances and we need to ensure it gets to those who need it most, in an efficient manner,” Mr Fahy said.
He said the association would work closely with the government to minimise the impact on the long-term retirement savings of Australians.
“The measures announced are very broad in terms of eligibility and we will work with our members to help understand the challenges that will present.”
Shadow assistant treasurer Stephen Jones called on the government to work closely with Labor and industry to go through the details to ensure retirement savings wouldn’t be destroyed in future.
“We are deeply troubled about the way this is likely to play out,” he said. “Some of the elements are not well thought through.”
Industry Super Australia chief executive Bernie Dean said it would need to be “handled very carefully in order to prevent the compounding of liquidity pressures that may be faced by superannuation funds in the current market conditions”.
He said super funds were not consulted in formulating the proposal and each super fund would have to manually issue the money.
“The scheme should also be reviewed as it is rolled out to ensure it will not hamper funds’ capacity to support the macro economic recovery,” he said.
Australian Council of Trade Unions president Michele O’Neil raised concerns changes to superannuation could have negative impacts on lower income earners.
“There are already hardship provisions for early access to superannuation for those in genuine need. We urge the government to step in and provide real wage subsidy support so people are not putting their retirement at risk,” Ms O’Neil said.
The government has also reduced superannuation minimum drawdown requirements for account-based pensions by 50 per cent for the 2019 and 2020 financial years. A similar measure was introduced during the Global Financial Crisis to help retirees weather through the downturn.
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Financial Services Council chief executive Sally Loane said the the decision to reduce minimum draw downs was a “welcome acknowledgement that it is inappropriate to force individuals to crystallise investment losses in a volatile market”.
Ms Loane also said the decisions around implementing super withdrawals were still being worked through.
“Accessing superannuation should not be the default response to providing income support for Australians in need over the short term, so we are pleased to see that this is a temporary measure as part of a broader income support package.”
Jennifer Duke is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra.