Government cautioned on extending early access to super
Broadening the rules on early release of superannuation benefits may not have the desired effect in some cases and could erode the retirement savings of individuals, says a technical expert.
In light of the government’s consultation on the rules governing the early release of superannuation, NAB director of SMSF and investor behaviour Gemma Dale said that allowing the early release of superannuation for a wider range of circumstances could mean that individuals are disadvantaged in the future.
“The sole purpose test is there to provide for your retirement and so the early access restrictions were originally designed to support you in a scenario where you probably wouldn’t make it to retirement if you didn’t get early access to your super, such as life threatening conditions for example,” she explained.
“I think broadening the range of conditions or circumstances under which funds can be accesses does have the potential to erode that asset base and therefore while you help someone now, they may be circumstantially disadvantaged in the future, and maybe we need to look at alternatives for that.”
Ms Dale said she has seen examples under the current early access rules where individuals have accessed their superannuation and have been left in a worse position because of the ongoing nature of their condition. She also acknowledged the sensitivity and complexities associated with creating legislation that deals with mental health, and the importance of getting it right.
“I spoke to a man who withdrew his superannuation to pay for rehabilitation for his alcoholism, but he didn’t complete the rehabilitation program, and has continued to have a patchy relationship with alcohol since,” she said.
The man who is now in his mid to late 40s now has no superannuation, she said.
“So it didn't have the desired outcome in that it has not resolved the health issue that he had and he now has no superannuation to provide for his retirement, and his health is not going to allow him to work well into his 60s,” she said.
“So I appreciate the difficulty for government in trying to legislate for scenarios like this - it's really hard.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.