Reserve Bank assistant governor Brad Jones speaks out against early release super
A senior Reserve Bank official has sounded the alarm over a proposal that could change how Australians use their retirement savings, warning of major risks.
A senior Reserve Bank official has spoken out against the idea of allowing early access to superannuation weeks after a Coalition frontbencher called for retirement savings to be used to buy a home.
But the chief executive of a super and wealth fund has argued it should be easier for Australians to access their retirement savings early for hardship and compassionate reasons.
Brad Jones, an assistant governor with the RBA in charge of the financial system, weighed into a policy issue dividing Australia’s major political parties by warning that allowing access to super before 60 could cause problems for Australia’s $4.8 trillion super sector.
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By continuing you agree to our Terms and Privacy Policy.“So, just purely through a financial stability lens, the way that we think about early release is it’s the unexpected nature of it that could create real problems for the super fund sector,” he told The Australian Financial Review’s Super & Wealth Summit in Melbourne on Monday.
Dr Jones said a rush to access super during a financial crisis, during a time when businesses were finding it harder to access finance, could also have broader economic consequences.
“It’s more just opening the system up, in an unexpected way in the middle of a crisis when liquidity conditions in financial markets might be very strained, that’s the sort of environment where obviously, where the dynamics become more challenging,” he said.
He also cited a major fall on global share markets as a particular risk, citing US President Donald Trump’s Liberation Day tariffs last year.
“The other issue that we’re very alert to, where the future can be different from the past, is where you have major financial market disruptions coalescing with a big operational event,” he said.
“April last year, was maybe a first shot across the bow that we as a sector need to be thinking about, how could major operational shocks coincide with major financial stress events to really make life interesting.”
Early access to super is allowed under limited circumstances including medical treatment for an individual or a dependent, palliative care and preventing the forced sale of a home.
Insignia Financial chief executive Scott Hartley, whose group includes wealth management and super fund IOOF, said early access to super needed to be streamlined.
“I think the Government could consider changing the settings on hardship and compassionate grounds to improve access, particularly as we head into a difficult economic environment, but I think any changes should be minimal,” he said.
“You can qualify for compassionate grounds, potentially easier than hardship so you could be living on the street but you can get your teeth fixed, that’s the sort of weird situation we’re in at the moment so I think that needs to be reviewed and perhaps the ATO could be doing both, compassionate and hardship assessments.”
Under existing rules, individuals apply to their super fund to access their retirement savings for hardship reasons but apply separately to the Australian Taxation Office it they need superannuation on compassionate grounds.
The Coalition supports allowing early access to super to buy a first home, with Opposition leader Angus Taylor yet to dump former Liberal leader Peter Dutton’s plan, taken to last year’s election, to allow a maximum 40 per cent drawdown of superannuation capped at $50,000.
Mr Taylor last month distanced himself from housing frontbencher Andrew Bragg’s call for first-homebuyers to be allowed to have their super used as collateral to get a mortgage.
Labor is opposed to super being withdrawn to buy a first home from the 12 per cent compulsory employer contributions but kept the former Coalition government’s First Home Super Saver scheme now allowing individuals to contribute up to $15,000 in one financial year, up to a maximum of $50,000 across all years, which can be withdrawn for equity in a property purchase.
During COVID in 2020, former Liberal prime minister Scott Morrison’s government allowed Australians to access up to $20,000 in super, in two maximum $10,000 instalments, tax free.
“There were a number of funds, at that time, that had net outflows equivalent to about five or six per cent of assets which is a very sizeable number,” Dr Jones said.
