Coronavirus: Taking super now will cost $100,000 later, funds warn

People under 30 who ­access their super now would end up at least $100,000 poorer in retirement, super funds have warned.

A 20-year-old worker who withdraws $20,000 would be $120,000 worse off in retirement, according to modelling by Industry Super Australia. Picture: istock

People under the age of 30 who ­access their superannuation now would end up at least $100,000 poorer in retirement, super funds have warned, as polling emerges showing that the bulk of households support the federal government’s plan to allow early access to super for the unemployed.

A 20-year-old worker who withdraws $20,000 would be $120,000 worse off in retirement, according to modelling by Industry Super Australia, which represents union and employee-backed not-for-profit funds.

Almost 80 per cent of consumers said they supported Scott Morrison’s plan, according to a Roy Morgan poll conducted on Sunday, when the government announced plans to expand financial hardship provisions to let the unemployed, and workers made redundant this year, to access $10,000 of their super tax-free this financial year, and another $10,000 next financial year.

The snap poll of more than 720 consumers showed respondents in all states and territories supported the government’s policy, with the largest majorities being in the under-40 age bracket.

Roy Morgan chief executive Michelle Levine said the results were a “clear indication the average Australian understands the gravity of the economic shock”.

Martin Fahy, chief executive of the Association of Superannuation Funds of Australia, said ­eligible households should withdraw only after they had exhausted other personal savings and government support.

“There’s no doubt for those people that are decades from retirement, taking money out now from a relatively small balance can be quite substantial,” he said.

ISA said early access “should be approached with extreme caution and only as a last resort”.

Its chief executive, Bernie Dean, told The Australian: “Taking your super now is like selling a house at the bottom of the market — you’ll lose money you would probably claw back over time.”

The $991bn of equities held in APRA-regulated super funds as of December might have shed as much as $300bn in value since ­December, based on how much benchmark global share indices have fallen as the economic crisis from the coronavirus escalates. Sally Loane, chief executive of the Financial Services Council, said she supported the government policy. “We understand there will be impacts on people’s retirement savings, but given the current ­national emergency, people in genuine hardship should be able to access their funds in this limited and temporary way to help them manage the crisis,” she said.

Mr Fahy said the tax office rather than super funds themselves should administer any hardship applications. He also suggested the Reserve Bank should help funds by providing them with cash so the funds could avoid having to liquidate their superannuation assets in depressed market conditions.

“Someone might have had $40,000 in their account a few months ago. And now it might be $22,000. It would be better to liquidate when prices have risen again,” he said.

Former Victorian premier Jeff Kennett told The Australian he supported early access to super, and suspending mandatory superannuation contributions as well.

“We wouldn’t want people to deplete their super but suspending for the rest of the year seems reasonable, given what we’re facing,” Mr Kennett said.

The Treasury estimates that about $27bn of superannuation ­assets — which were valued at almost $3 trillion in December — might be withdrawn.