The $54,000 cost of early super drawdown
People who access the full $20,000 available from the Federal Government’s hardship early release superannuation scheme will be over $54,000 worse off in terms of their retirement balance in 20 years’ time.
That is the assessment of Wealth Within chief analyst, Dale Gilham who has added his voice to those questioning the long-run fall-out from the early release scheme.
His comments have come following superannuation fund executive confirmation of a spike in people seeking to access the 1 July second tranche of the scheme.
Gilham has questioned whether the early release scheme has achieved what it set out to do, noting that he had spoken to several people who had accessed the money but did not needed and “wanted it simply because they do not like superannuation”.
“While others have used the money to pay bills or reduce debt to give themselves some breathing space during the lockdown, you have to ask is this robbing Peter to pay Paul,” Gilham said.
“If you take $10,000 out of superannuation, then according to ASIC’s compound interest calculator, your superannuation would be worse off by around $27,000, assuming a compounded growth rate of 5% over 20 years. If you take the full $20,000, then you will be over $54,000 worse off in 20 years based on the same compounded growth rate.”
“So, did the scheme do what it was supposed to do?” Gilham asked. “We don’t really know the impact of that just yet, but what we know is that those who took the money will be worse off in retirement, which is not good.”
The Australian Prudential Regulation Authority (APRA) is expected to give an insight into the scale of the second tranche draw-down spike when it releases new data this week.
Recommended for you
AMP is to launch a digital advice service to provide retirement advice to members of its AMP Super Fund, in partnership with Bravura Solutions.
Unveiling its performance for the calendar year 2024, AMP has noted a “careful” investment in bitcoin futures proved beneficial for its superannuation members.
SuperRatings has shared the median estimated return for balanced superannuation funds for the calendar year 2024, finding the year achieved “strong and consistent positive” returns.
The second tranche of DBFO reforms has received strong support from superannuation funds and insurers, with a new class of advisers aimed to support Australians with their retirement planning.
