Superannuation is a unique investment vehicle. For many of us, we set and forget. Employers contribute 9.5% of our ordinary wages and we, hopefully, watch the value of the nest egg grow.
“There are a lot of people who over time, as they’ve been accumulating, haven’t been focusing on their super,” says Bryan Ashenden, head of financial literacy and advocacy at BT.
But is set and forget the right way to go, especially during the pandemic?
“We shouldn’t forget about it. Once engaged, stay engaged,” says Ashenden.
Early access to super
The outbreak of Covid-19 saw the tax office move to allow people access to $10,000 of their super until June 30, 2020, and a further $10,000 from July 1 until September 24, 2020.
The Association of Superannuation Funds of Australia (ASFA) estimates that as of May 7, super funds had made about 1.2 million individual early payments, totalling $9.4 billion in financial support.
“People need to understand the consequences of accessing their superannuation early,” says Ashenden. “Of course, there are people who need access to that money. If the cost of debt outweighs what they’d make on super, it might be the right move.”
But there are consequences. If you’re withdrawing money at the bottom of financial markets, your account has to work harder to recoup the losses.
“Some of that cost is the forgoing of future investment earnings and for some members the cost may materially impact their income in retirement,” says Shawn Blackmore, group executive member experience and advice at AustralianSuper.
This story is from the June 2020 edition of Money Magazine Australia.
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This story is from the June 2020 edition of Money Magazine Australia.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
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