Experts are warning Australians experiencing financial distress because of the coronavirus crisis not to withdraw their superannuation early.
From mid-April, individuals affected by COVID-19 will be allowed to access up to $10,000 of their super.
Additionally, they will be allowed to access a further $10,000 next financial year.
However, industry bodies warn that a 25-year-old taking full advantage of the government’s offer will lose between $58,000 and $84,800 by the time they reach retirement age.
Withdraw your superannuation early – who can?
Australians who want to access their superannuation early must meet one of the following requirements:
- Be unemployed.
- Be eligible to receive the JobSeeker payment, youth allowance for jobseekers, parenting payment or farm household allowance.
- Made redundant after 1 January this year, or alternatively, had your working hours reduced by 20 percent of more.
- If you’re a sole trader and your business has been suspended or your turnover fell by 20 percent of more.
The Australian Taxation Office will manage all payments of the tax-free super payments.
Once the measures are available applicants can apply though my.gov.au.
Only use super as a ‘last resort’
Industry bodies and fund managers unanimously say drawing down on superannuation is a last resort.
Australian Institute of Superannuation Trustees chief executive Eva Scheerlinck said:
“We’re not making a $10,000 decision here.
“We’re making a decision that impacts on our retirement to thousands of dollars.”
She added that young people and women were most at risk of losing out.
Modelling by SuperRatings and Industry Super Australia forecast the following losses:
- Between $45,000 and $70,000 in savings for workers in their thirties; and
- Between $24,000 to $27,000 for employees in their fifties.
The projections are based on data from the Australian Investments and also the Securities Comission’s Moneysmart calculator.
“Australians need to go into this with their eyes wide open,” said SuperRatings chief executive Kirby Rappell.
Workers encouraged to explore other options first
The funds representing hospitality and retail, Hostplus and also Rest Super, both acknowledged the financial difficulty faced by their members.
Even so, they want to encourage them to explore other government initiatives before dipping into their super.
Rest Super chief executive Vicki Doyle said:
“The government has introduced many important initiatives designed to provide valuable financial assistance as a result of impact of the coronavirus.
“We would encourage members to consider those options first and only take money from their super if they have no other option.”