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As Good as it Sounds? Early Access Super Posted on May 8, 2020
More than $10 billion has been withdrawn from 1 million superannuation funds as part of the Early Access scheme.
The scheme enables fund holders experiencing financial hardship to access $20,000 from their superannuation over two years.
Accountants and Financial Planners will naturally caution against early withdrawal because of the potential of this amount to be worth significantly more in later years. Assumptions by Industry Super* indicate that, depending on your age, this could have a value of up to $90,000 in retirement.
But the reality remains that COVID-19 has put pressure on personal cashflow and this scheme may be necessary to make immediate ends meet.
Here are some considerations for the scheme:
- Articulate your short-term versus long-term goals. If survival is your short-term goal, set down how you will make it up to your fund later on. You don’t want to face this cash stress when you’re in retirement and unable or unwilling to go back to work. Make your long-term goal SMART – that is specific, measurable, attainable, realistic and time-based.
- Engage with your fund. On Friday 8 May, the Australian Federal Police and Australian Tax Office paused the program due to fraudulent claims. If you regularly engage with your fund, you will detect any discrepancies early on.
- Check the insurance conditions of your fund. You could lose your insurance in super if your balance dips below $6000.
- Be prepared to lose long-term value. Investments have taken a hit due to COVID-19 so now is the worst time to sell as you “lock in the losses” and your money will not have time to recover.
We encourage you to talk to us before you activate the scheme. We can guide you through the process and support you to meet your immediate and long-term needs.
Written by David Evers, Managing Director and Senior Financial Planner
*Industry Super Early Access to Superannuation Assumptions: https://www.industrysuper.com/assumptions/