Concern is growing that early access to superannuation on medical grounds, especially for procedures such as bariatric or ‘gastric band’ surgery, is draining coffers.
The government is reviewing early access and out-of-pocket medical expenses amid figures that show Australians are increasingly turning to superannuation to fund improvements to their health.
As noted by Professional Planner, from 2010-11 to 2015-16, applications for early access on medical grounds rose from 4000 to 22,000, with approvals increasing from 2500 to 15,000. The average amount accessed also increased, from $9000 to $14,000. The paper made clear that the rise was attributed to “out of pocket expenses associated with bariatric surgery (that is, weight-loss surgery), with a smaller proportion attributable to assisted reproductive treatment (ART), also referred to as in‑vitro fertilisation (IVF) treatment”.
“In the period July to September 2016 around 56 per cent of approved medical ground applications were for bariatric surgery,” the report stated.
Earlier this month, Minister for Revenue and Financial Services Kelly O’Dwyer released a consultation paper regarding the early release of super “under compassionate and financial hardship grounds and for victims of crime compensation”.
The consultation paper ultimately posed the question of whether the relevant SIS regulation “should be amended to refer to ‘treatment’, rather than alleviation of acute or chronic pain. Alternatively, should those provisions be removed entirely (so that early access is available only where the individual’s condition is life‑threatening)? What would be the consequences of this approach?”
In addition to weight-loss surgery, the paper also focused on a proposal that victims of crime should have access to the perpetrator’s superannuation, and whether domestic abuse survivors should be granted early access. Also, in last year’s budget the government legislated the first home owners’ superannuation savings scheme, which gave people another conduit by which they could effectively siphon their retirement savings.
These developments have brought the broader issue of superannuation access to the fore. Reports that clinics specialising in gastric band surgery are including links to government sites explaining how to access their super on medical grounds have only served to intensify the debate.
Industry groups concerned
The Financial Services Council states that the government’s review into the early release of super is necessary.
“The superannuation system was designed with one purpose: to allow Australians to be self-sufficient in retirement,” an FSC spokesperson told Professional Planner. “It is concerning there has been a rise in the number of people being granted early access to superannuation and entirely appropriate that the government is conducting a review into the rules and how they are administered.”
John Maroney, chief executive at the Self-Managed Superannuation Fund Association, makes the point that retirement funds should be accessed before retirement age only in life-or-death scenarios.
“It’s best for most super to be kept for retirement,” Maroney says. “But if people need money for a lifesaving operation and the only access they have is super and they’re not going to live into retirement, then that would be quite sensible.”
The view of institutional stakeholders such as the FSC and the SMSFA is clear: superannuation should be reserved for retirement. Contributions to super receive favourable tax treatment as an incentive to get people to fund their own retirement and alleviate the social security burden on public funds.
Sarah Riegelhuth, founder and chief executive of Gen Y advisory firm Wealth Enhancers, and author of Get Rich Slow, shares this view.
“I am not a fan of superannuation money being used for anything other than retirement savings,” Riegelhuth says. “People who need to access their superannuation money for something like this are likely very low-income earners and need every dollar of their retirement savings for when that time comes.
“I understand the case for proactive and preventative healthcare; however, I’d prefer to see things like bariatric surgery added to the public health system, rather than allowing people to use their retirement savings for it.”
This need for the government to more acutely address the out-of-pocket expenses associated with treatments such as weight-loss surgery was acknowledged by Minister for Health Greg Hunt on January 2, when he announced an “expert committee to consider out-of-pocket medical expenses”.
“The Turnbull Government will work with the medical profession to address the large and sometimes unanticipated out-of-pocket medical fees some patients face,” the media release stated. These fees, it says, represent “a matter of justifiable and considerable community concern”.
An investment in health
Are surgeries, in some cases, more important to the individual than the superannuation accounts that are funding them? In a broader sense, do significant health improvements and a happier, better quality of life sometimes supersede the need for a bigger retirement balance?
Jade Mirovic, who withdrew exactly $6550 from her superannuation to fund gastric band surgery in July last year, is adamant the sacrifice was justified. “I have spent all of my adult life fighting obesity,” she tells Professional Planner. “The way I see it, I’ve taken from my super to invest in my health.”
Mirovic is aware of the consequences of dipping into her super, but is convinced the benefits far outweigh the disadvantages.
“Firstly, those initial funds have already been replaced,” she says. “Yes, I may have lost out on interest rates but it’s an extremely small price to pay for an extended life. I will be less of a burden on the Australian people because of this one small sacrifice, and in turn become more productive within my working life because I will have reduced all future health risk factors.”
What do you think? If you have an opinion on whether accessing superannuation for bariatric surgery and IVF treatments is justifiable, please email Tahn Sharpe: tahn.sharpe@conexusfinancial.com.au
