The scheme was introduced to offer relief for those who had lost their income as a result of the coronavirus pandemic but a concerning number have withdrawn from their nest egg and lost it all on the web, according to a report from the Australian Financial Review.
“We saw someone take out the whole $10,000 amount on Thursday and by Monday they had none left,” an industry source told the publication.
RELATED: Extraordinary warning for amateur investors
RELATED: Bank ‘deeply sorry’ after backlash
RELATED: Plan for $50k handout to homebuyers
The alarming revelation isn’t surprising, Financial Rights Legal Centre policy officer Julia Davis said, after it emerged the emergency access to funds had also been used for other reckless purchases such as new cars.
So far more than 1.6 million Australians have had their application under the scheme approved, which allows those impacted by the outbreak to draw down $10,000 from their super this financial year and another dose of the same amount after July 1 until September 24, 2020.
The Morrison Government has received bipartisan vindication for the role its JobKeeker scheme has played in softening the blow to unemployment as well as its swift action to push forward the JobSeeker package.
But the early release program is viewed as an ill-advised response, which has allowed Australians to access more than $13 billion in total from retirement savings.
“We certainly wish the government had thought it through a little bit before they just opened up this can of worms,” Ms Davis told news.com.au.
“We’re glad that they thought about trying to relieve some of the extreme financial hardship that people are going to be in during this pandemic but accessing your superannuation should be a last resort.
“And unfortunately we’re seeing a lot of examples of people accessing it as a first resort. This should not have been one of the first parts of the economic package.”
Financial counsellors have told the legal centre how those who have accessed their super have spent the money on new cars, holidays and supplementing poor financial decisions.
“There’s a good chance people are just going to try and use this money to get themselves out of debt just to get themselves further into debt and need to go bankrupt anyway,” the policy officer said.
“And then all this money from their super is gone forever.”
Ms Davis said the Government should have taken its time to ensure Australians were accessing super for the right reasons, were educated on the true cost of drawing down on it and had access to financial advice.
“People would have accessed it just out of sheer panic at the uncertainty of the situation not knowing what would happen to them,” she said.
“There’s a lot of things that people wouldn’t know such as your super being protected in bankruptcy but not once you’ve accessed it, or if you’re not going to deal with the underlying mismatch between income and expenditure you shouldn’t be wasting your super on debts.”
The Financial Rights Legal Centre has been awash with complaints of real estate agents, businesses and even Centrelink staff using the access to super initiative as a means to bully and manipulate the community.
“We’ve seen numerous examples of landlords and real estate agents telling people to get their super to pay rent, which is a sad outcome,” Ms Davis said.
“Suppliers who are angry they’re not getting paid are pressuring small business owners to take out their super.
“We’re even hearing over and over again that Centrelink itself are telling people who are trying to access JobSeeker payments who don’t apply to access their super.
“It’s a shame that people are out there pressuring people to do this without giving people that proper information and advice.”
Investment experts have also been strong in their criticism of the package, warning of the significant cost of dipping into retirement funds.
A 25-year-old who withdraws $20,000 over the next two years stands to miss out on more than $200,000 by the time they’re 65 based on a standard compound interest rate of 6 per cent, Burman chief investment officer Julia Lee says.
“Don’t make long-term decisions based on short-term factors,” she told news.com.au.
“The whole idea of superannuation is the beauty of compounding over time, which means you have time working in your favour for a long-term investment.”
She strongly advised those struggling to make ends meet to exhaust other channels such as the government’s massive $130 billion JobKeeper package or its Jobseeker initiative.