As unemployment continues to rise, latest analysis of the implications of the government's early access to super initiative has seen the estimated cost of the measures almost double.
Research house Rice Warner has assessed the impact of the government's decision to allow Australians suffering financial stress to access their super early to be well above the $27 billion originally offered by Treasury.
Rice Warner said that while the original figure "appears manageable", the impact would vary from fund to fund, noting the specifics of each fund's membership base will determine the extent of the hit they take.
"Some industries have been hit very hard, particularly tourism, retail shopping (apart from supermarkets), and hospitality," Rice Warner said.
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"Some funds have a high portion of members from these industries so they will bear a disproportionate share of the impact - and will be felt in several ways."
The firm said those funds would pay out large unplanned benefits, which would result in members capitalising investment losses, and added many members with small balances will leave the fund entirely.
Originally, the impact of the policy was thought to be $27 billion, around 1% of the $2.7 trillion in assets held by the super sector.
However, the research house believes the level of unemployment has grown since the government launched the initiative as part of its wider economic response to the crisis.
"Rice Warner's estimates for the industry is in the range $40 to $50 billion as we expect the level of unemployment has grown since Treasury first modelled this," Rice Warner said.
The firm said that while most funds will have strong cash flows and cash balances, withdrawals will reduce cash for reinvestment in assets with depressed market prices.
"For the 25% of funds which will lose up to 10% of their members, a reassessment of cash flow, liquidity and asset allocation will be critical," the firm said.
The potential impacts of the policy aren't only confined to funds, with Rice Warner commenting members were likely to gloss over several downside issues to withdrawing $20,000 tax-free from their retirement savings before retirement age, including the forfeiture of life insurance if a member leaves their super fund as a result.
Additionally, the withdrawals will occur while asset prices are low, meaning members won't get the chance to wait for a market rebound, and thus securing any losses they've suffered in the market rout.
"Given these risks, as COVID-19 continues to progress through our population and economy, superannuation funds are needed now more than ever," Rice Warner said.
"While superannuation is for retirement, these are unusual times with unique circumstances, and we all need to play a part.
"Importantly, this will mean that funds will need to go above and beyond to engage members. In doing this, and by providing the tools and information that are required to make decisions, funds will ensure that irrespective of short-term volatility, the retirement of members remains healthy."
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