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
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.
The financial services technology firm has officially launched its digital advice and education solution for superannuation funds and other industry players.
The ETF provider has flagged a number of developments as it formally enters the superannuation space through a major acquisition.
While all MySuper products successfully passed the latest performance test, trustee-directed products encountered difficulties.
