The long and the short of accessing your super early

The Federal Government has responded to the Coronavirus crisis with a raft of financial measures to help us through this difficult period, including the ability to access your super early. While it may help in the short term, what are the long-term impacts on your super?

With the exception of financial hardship or compassionate grounds, usually we can’t access our super until we reach retirement age. But the Coronavirus pandemic has impacted our lives and our finances in so many ways, the normal rules don’t always apply. The Federal Government has temporarily changed the rules to allow people early access to their super under certain circumstances.

The new legislation allows individuals impacted by the Coronavirus pandemic to access up to $10,000 of their superannuation in 2019-20 (by applying between 20 April and 30 June 2020) and a further $10,000 in 2020-21 (by applying between 1 July and 31 December 2020).

Are you eligible?

You can request early access to your super if you’re unemployed, on a Centrelink benefit, had your work hours reduced by at least 20 per cent, or if your business turnover is down by at least 20 per cent. The amount you can take out is limited to $10,000 in the 2019-20 financial year and $10,000 in the following financial year. You will not need to pay tax on the amounts released and it will not affect Centrelink or Veteran’s Affairs payments.

What are the impacts on your super in the long-term?

Super is a long-term investment to help provide financial security in retirement. Withdrawing money prior to retirement means losing out on the benefits of compound interest over a number of years. For instance, if you are 30 years old now, thanks to compounding interest, the $20,000 in your super today will be worth a lot more when you retire in 35 years’ time.

See how withdrawing $20,000 could impact Callum's super

Take a look at the infographic below for an example of the impact an early withdrawal from super can have. Callum is aged 32 and elects to withdraw $20,000 under the new compassionate early release measure. Fast forward 35 years and Callum, aged 67, retires from the workforce. Assuming an earnings rate of 5%, Callum would have $126,708 less in his accumulation account.¹

And that’s being conservative. If your super returns 9% a year, which is the average of most funds over the past 10 years, that $20,000 would equate to a lot more dollars in lost retirement income – and that will impact your standard of living in retirement.² Visit the ESSSuper website for more examples like these, or you can use the Lifetime Supermodeller on our website to calculate how making an early withdrawal from your super could impact your income in retirement.

Want to know more?

You may also want to seek independent financial advice before making a decision about making an early withdrawal from super. We can refer you to an ESSSuper Financial Adviser,⁴ who understands the complexities of your ESSSuper funds, and is able to advise on how this could impact your overall financial situation. ESSSuper Financial Advisers will provide an upfront indicative cost for this advice. To arrange an appointment, call our Member Service Centre on 1300 650 161 (Emergency service members) or 1300 655 476 (State super members).

1. 'Early Access to Super', ESSSuper. Figures via ASIC's MoneySmart calculator, have not assumed any taxes or inflation rate. This is an example only and might not reflect your personal financial situation. The purpose of the examples above are to show you the effect withdrawing $10,000 and $20,000 from your super on compassionate grounds during the 2020 and 2021 financial years. ESSSuper has made reasonable efforts to ensure the accuracy of the information provided. The information and estimates provided are general and should not be relied upon as a true representation of any actual superannuation entitlements or benefits from any particular scheme or relied on as a basis upon which to alter your financial situation without advice from a professional. You should assess your own financial situation and consult a financial adviser before you make any changes to your financial affairs.
2. ‘Half a million reasons to think long and hard before withdrawing your superannuation during the coronavirus downturn’, ABC News
3. ‘Thinking of withdrawing some of your superannuation early?’, ABC News
4. ESSSuper Financial Advisers are authorised representatives of Link Advice Pty Ltd (Link Advice). Link Advice holds a current Australian Financial Services Licence No. 258145 and is responsible for the financial services provided to you. ESSSuper has an arrangement with Link Advice Pty Ltd to provide financial advice to ESSSuper members. ESSSuper pays Link Advice a fee for this service. Neither the Board, nor the Victorian Government, guarantee or endorse any recommendations made by Link Advice, or are responsible for the advice and actions of Link Advice.
The information contained in this document is of a general nature only. It should not be considered as a substitute for reading ESSSuper’s Product Disclosure Statement (PDS) that contains detailed information about ESSSuper products, services and features. Before making a decision about an ESSSuper product, you should consider the appropriateness of the product to your personal objectives, financial situation and needs. It may also be beneficial to seek professional advice from a licensed financial planner or adviser. An ESSSuper PDS is available on our website or by calling 1300 650 161.

The long and the short of accessing your super early

The Federal Government has responded to the Coronavirus crisis with a raft of financial measures to help us through this difficult period, including the ability to access your super early. While it may help in the short term, what are the long-term impacts on your super?

Are you eligible?

What are the impacts on your super in the long-term?

See how withdrawing $20,000 could impact Callum's super

Want to know more?

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