Dire warning as $3 trillion wiped from Aussie super funds

Around $3 trillion could be wiped from Australian superannuation funds over the next two decades if the Covid-19 fallout is not managed properly, new data reveals.

Prior to the pandemic, Australia’s superannuation savings were projected to climb to $10 trillion by 2040, but this figure has been revised down to $7 trillion, according to data provider Rainmaker Information.

The prediction is based on a recession, rising unemployment, lower super contribution levels and a reduced population growth.

“This lower projected outlook for superannuation savings outlook could have significant economic consequences on Australia if it is not carefully managed,” said Rainmaker Information executive director of research and compliance Alex Dunnin.

“Super funds are major investors into Australia’s economy with their investments spanning infrastructure, property, purchase of government bonds, company shares, agribusiness, seeding start-ups and energy projects.

“Three trillion dollars less in available capital could have major ramifications.”

Rainmaker Information predicts that while super balances are expected to deteriorate, not-for-profit super funds will dominate the industry, beating out retail and self-managed super funds in the future.

The change could “fundamentally reset” Australia’s superannuation sector, Dunnin said.

“We are already seeing this playout with these sectors working hard to become much more efficient, lower their fees, develop new lines of business, new channels and platforms,” he said.

The announcement comes as almost half a million Australians raided – and completely emptied – their super funds, even before the government’s second round of early super release came into force.

“Those early contributions are like yeast; without them you’re left with a much flatter nest egg,” ISA chief executive Bernie Dean said.

“To have hundreds of thousands wiping their savings out midway through their life is a tragedy waiting to happen and it will affect everyone.”

The deadline for Australians in financial strife to access $10,000 of their superannuation has been extended from 24 September to 31 December, after the government revealed the unemployment rate could peak at 9.25 per cent at the end of the year.

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