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Australians who withdrew their super early at the start of the pandemic stand to be up to $43,000 worse off by retirement, a new report says.
Former treasurer Josh Frydenberg in March 2020 announced that financially stressed Australians who had lost working hours as a result of Covid-19 lockdowns, would be allowed to withdraw up to $20,000, in two maximum instalments of $10,000.
Two years on, the Association of Superannuation Funds of Australia (ASFA) estimates someone who withdrew $10,000 at age 30 would be $21,516 worse off by retirement.
Australians who withdrew their super at the start of the pandemic stand to be up to $43,000 worse off by retirement, a new report says (pictured are young women at Randwick Racecourse in Sydney)
Glen McCrea, ASFA’s deputy chief executive, said young Australians – who lost more working hours because of lockdowns – were set to suffer the most long-term damage
This 30-year-old worker who took out $20,000 would be $43,032 worse off once they reached 67, the age pension threshold from July 2023.
Barefoot Investor author Scott Pape said ASFA’s $535,000 super savings goal for someone retiring at 67 was too excessive and endorsed Super Consumers Australia’s $258,000 target
A 40-year-old Australian who took out $10,000 would be $17,512 short by retirement.
The same worker who withdrew $20,000 would be $35,024 worse off.
A 50-year-old worker who siphoned $10,000 would be $14,253 worse off and be $28,506 short if they took out $20,000.
Glen McCrea, ASFA’s deputy chief executive, said young Australians – who lost more working hours because of lockdowns – were set to suffer the most long-term damage.
‘Young people, women, single parents and the unemployed paid a high price in terms of the cost to their retirement savings,’ he said.
Mr Frydenberg in April 2020 announced taxpayers would be allowed to withdraw up to $10,000 from their superannuation, tax free, by the end of June that year plus another $10,000 by the end of September 2020.
Former treasurer Josh Frydenberg in March 2020 announced that financially stressed Australians who had lost working hours would be allowed to withdraw up to $20,000, in two maximum instalments of $10,000 (pictured is Melbourne’s Flinders Street station in 2020)
They were allowed to withdraw their super without it affecting their Centrelink or Veterans Affairs entitlements.
The Labor Opposition at the time and trade unions, which run many industry funds, were opposed.
This saw super funds release $38billion in funds under the temporary early relief scheme.
New Zealand citizens in Australia unable to access Centrelink payments were among those who made withdrawals from their super.
About three million Australians applied for early release super, with one-third of one million of these workers cleaning out or depleting their retirement savings.
‘While superannuation was able to do much of the heavy lifting by distributing payments to people quickly in the early days of the Covid-19 pandemic, it’s important that we recognise the detrimental impact that this has had for the retirement savings of millions of Australians,’ Mr McCrae said.
ASFA estimates someone retiring at 67 to receive a part-pension would need to have $535,000 in superannuation for a comfortable retirement, based on someone having paid off their home.
But Super Consumers Australia believes $258,000 is sufficient.
Barefoot Investor author Scott Pape said ASFA’s super savings goal was too excessive and endorsed Super Consumers Australia’s target.
‘For far too long the super industry has played to the millionaires in the members’ stand,’ Pape said.
Australians have $3.4trillion tied up in superannuation.
Two years on, the Association of Superannuation Funds of Australia (ASFA) estimates someone who withdrew $10,000 at age 30 would be $21,516 worse off by retirement (pictured is a young woman at Sydney’s Randwick Racecourse)