A working group of The Conexus Institute, Super Consumers Australia and The Actuaries Institute has released an information sheet to assist super funds help their members decide whether to utilise the Government’s early access to superannuation provisions released as part of its coronavirus stimulus measures.
The information sheet was released on the same day that Australian Securities and Investments Commission released a FAQ page addressing guidelines around projecting the retirement impact of early access to super. ASIC highlights that communications from super fund trustees should be “clear, accurate, balanced and must not mislead or deceive”.
According to the industry information sheet a combined $20,000 withdrawal is projected to lead to a $50,000 eventual superannuation balance reduction for someone who is currently aged 30, and a $39,000 hit for someone who is currently aged 40. For a 50-year old this estimated impact is reduced to $30,000 in retirement, while a 60-year old is projected to have a reduced balance of $24,000.
The information sheet also estimates the impact a $20,000 withdrawal would have on a retirees’ income in retirement, which ranges from $108 per fortnight for a current 30-year old to $52 per fortnight for a 60 -year old.
The information sheet provides some additional consumer information on early access that funds may wish to communicate to their members.
“Withdrawing from your super now can only reduce savings at retirement which means less income in retirement,” the sheet notes. “The size of the impact is uncertain because it will depend on unknown factors such as the future rate of investment earnings on your super.”
Consumers with low balances should be wary of losing their insurance entitlements when making early access withdrawals, it adds.
“When weighing up whether to access your super early it is a good idea to balance your whole household’s financial needs now and in retirement,” said Xavier O’Halloran, director at Super Consumers Australia. “You should also consider your insurance needs, as early access may leave you without enough savings to continue paying for insurance premiums in super.”
It’s feasible that the information sheet could also be used by both non-super fund licensed financial advisers and Financial Counsellors Australia, the two groups most likely to advise clients on early super access outside of the super funds themselves.
*Correction – an earlier version of this story incorrectly linked the information sheet to the Australian Securities and Investment Commission. ASIC did not play a role in the production of this document.
“Withdrawing from your super now can only reduce savings at retirement which means less income in retirement”
Actually, no. If it allows you to get to a home deposit that much more quickly – and $40,000 per couple is a large amount in this context – then withdrawing these funds mean you can get into the property market more quickly and most people would consider this a large advantage, bigger than a higher super balance in 40, 30 or 20 years time.
It is a very individual decision but there are instances where $20,000 or $40,000 will have an outsized influence on people’s wealth – whether it stops them spiralling into a large loss or allows them to invest in something with substantial return expectations. Or they can spend it all and substantially harm their future wealth. Would be interesting to check in five years’ time what people did and who benefited and who was harmed.