Given the unprecedented times we are currently facing, the Federal Government has announced support packages and policies to help Australians who are facing financial hardship.
One such package is the Covid-19 early release of superannuation. Eligible individuals will be able to apply to access up to:
In order to apply, Australians must meet certain broad criteria which include be unemployed, eligible to receive certain payments such as job seeker payment, had their working hours or turnover reduced by 20% or more or had their business suspended.
The many sectors of the economy impacted include retail, hospitality, childcare and aged care – sectors typically employing large numbers of part-time and casual workers, many of whom are women. Women already retire with on average 40 percent less super than men and we are also seeing growing numbers of older women experiencing homelessness as women retire with limited financial resources. The long-term financial impacts of accessing $10,000 or $20,000 of super now could be catastrophic for women who can so ill-afford to see their super balances reduced. Modelling undertaken by ISA shows that a 30-year-old who accesses $20,000 from super now could lose about $100,000 when they hit retirement and a 40-year-old could lose more than $63,000.
All other alternatives such as payment extensions or suspensions from landlords, banks, financial service providers and utility providers should be explored first. Financial advice should also be sought before making a final decision and to help decide whether to access the full amount or a lesser amount.
Tania Clarke, Manager Policy and Campaigns, Women’s Legal Service Victoria, cautions that women experiencing family violence almost always experience economic abuse and worries that women could be forced into accessing their super early by violent partners. There are no provisions in the current package to counteract this risk.
The recent practice of rental agents asking questions on superannuation balances and whether private renters have applied to access their super is abhorrent and potentially illegal. We were pleased to see ASIC respond to this immediately when it was brought to their attention by superannuation bodies.
The Covid-19 early access to superannuation package could provide a lifeline for some, but it should be used as a last financial resort and recipients need to be aware that they may be trading off future financial security in retirement.