Image description: On a grey background, a pink origami pig sits on the right.
By Brook Lewis
You may have heard the government’s announcement that individuals affected by COVID-19 may be eligible to access up to $20,000 of their superannuation between now and September.
As this pandemic has affected so many in hospitality and retail industries – industries which we uni students commonly work in – we spoke to some experts on what you should know before you consider accessing your super during these trying times.
What is this super access scheme, and who is eligible?
Typically, access to superannuation is limited to circumstances, such as when you retire (at sixty-something); permanently leave Australia; or face financial hardship or medical circumstances. The federal government has announced that in addition to these criteria, you may be eligible to access up to $10,000 from your super in this financial year and the next.
The ATO’s website states to be eligible, you must satisfy any of a list of requirements, including being unemployed; already being eligible to receive some government payments; being made redundant; or having your hours or sole trader turnover reduced by at least 20% this year.
You should also know that if you access your super, it may affect any insurance you have through your super fund. This could either be because there are insufficient funds to pay the regular premiums (insurance costs), or if your total balance drops below $6,000, this may deactivate your TPD or life insurance. It is best to check this with your super fund first.
For instance, Emily*, a 22-year-old student, has recently been laid off from her hospitality job after working there for eleven months, and is considering accessing her super. Her reasoning is she doesn’t “…have much [money] in there,” and with “…no job, and no certainty [she] can get one for the rest of the year,” Emily states she is “happy to wipe [her super] out and start fresh.” When she was laid off, Emily decided the best option was to move back with her parents. However, she is still paying rent on a room in a share house.
Just because I can, does it mean I should?
This is a very complicated area. There are many people in very different circumstances right now who may be thinking about this super access scheme, and it is easy to focus on the obvious benefits – the cash in hand, right now. But how will this affect you down the track?
Celia Dufall, Principal of the Financial Counselling Network, believes “You should think long and hard about this before you do”:
“Superannuation is there to support you when you retire and no longer earn any income. Its compounding affect over time means that one dollar now will be worth considerably more when you retire. Accessing your superannuation now, especially those under thirty, may be one of the most expensive ways to access money you have and should only be used as a last resort.”
| Cost of $10,000 at age 65 when withdrawn at different ages | |
| 20 | $319,204 |
| 25 | $217,245 |
| 30 | $147,853 |
| 40 | $68,484 |
| 50 | $31,721 |
| 60 | $14,692 |
*Calculated at 8% annual growth
When asked what her biggest hesitation was about accessing her super, Emily said:
“I wouldn’t say there is any hesitation – I don’t have much in super as a young adult. It may sound selfish and millennial of me to take it out during these times, but I personally don’t think what I take out would have much adverse effect. If anything, my only hesitation is my Dad telling me not to.”
After being shown the above table, Emily responded that she “had no idea it would be that big of an increase,” and that made her “rethink the decision,” but ultimately, she would go ahead with it.
“For me being able to pay rent and bills now, I can mourn my future dosh,” she says.
Exhaust other options first
Apart from the long-term cost of withdrawing your superannuation, what other options are there available in the short- to medium-term? Dufall says: “Financial counsellors, who support people experiencing financial hardship, will always look at all other options for a client before they consider accessing superannuation,” and sets out some key criteria:
– Are you eligible for any of the Government COVID-19 response payments/supplements?
– Can you negotiate a moratorium or delay on your debt repayments? Many creditors are approving six month deferred payments to allow people to get back on track.
– Review your expenditure – can you reduce any of your costs?
– Do you have any savings you can use?
– Have you got access to reasonably priced credit?**
From Emily’s experience, “Centrelink is a different journey entirely,” and she’s still waiting to hear back from them. Until then, she “just needs something to help the transition.” However, after seeing some of the other options, Emily stated “I will try other avenues before super.”
In Summary
Although many of you may be considering dipping into your super, it is worth noting that this decision shouldn’t be made lightly. It is best to go into this process with eyes wide open, understanding all the other options and implications. Although accessing super may be better than taking on high interest consumer credit, it is best to fully acquaint oneself with other available avenues.
Dufall recommends speaking to a financial counsellor – they provide a free service for people experiencing financial hardship, and offer information, advice and advocacy to help you get back on track. To find your nearest financial counsellor, please call the National Debt Helpline on 1800 007 007.
The information provided in this article is general only and does not consider your specific circumstances or financial needs. You should seek advice from a licensed and trusted professional to obtain specific information for your circumstances and needs.
*Name changed for privacy.
**If your income is below $45,000, or you are on a benefit, then you may be eligible to access a No Interest or Low Interest Loan – check out WA NILS for more information.
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