Media Super issues advice on COVID-19 super withdrawals

Media Super, the industry superannuation fund for the printing and graphic arts industries, understands many will have no choice but to withdraw their superannuation to survive COVID-19 but acting CEO Tony Griffin is urging caution and an awareness of the facts.

The early withdrawal of superannuation was one of the federal government’s stimulus measures to help Australians manage as thousands suddenly found themselves out of work due to COVID-19 shutdowns.

It allows eligible account holders to withdraw $10,000 before July 1, 2020, with a further $10,000 to be withdrawn from July 1, 2020 to September 24, 2020.

To qualify, account holders need to either be unemployed or demonstrate that since January 1, 2020 they have had their work hours reduced by 20 per cent or have been made redundant.

Sole traders need to have suspended their businesses or had a 20 per cent reduction in work.

Once eligibility is confirmed and the superannuation funds have been notified it takes five days for the money to be returned to the account holder.

Applications need to be made through the Australian Taxation Office via the MyGov website.

Retirement funding hit

Griffin says the most significant impact of early superannuation withdrawal is the risk of reduced retirement funds down the track.

Figures from Super Consumer indicate an account holder (based on a 30-year-old accessing the full $20,000 across the 2019-20 and 2020-21 financial years) could have up to $48,823 less in their account at retirement, says Griffin.

“A lot of hardworking people have lost jobs or income and are facing tough times financially,” Griffin told Sprinter.

“We understand that some people will have to access their super savings but we want our members to make an informed decision and understand the potential impacts.

“The most obvious being the negative impact on their super balance when they retire. Even withdrawing a small amount now can make a significant difference over several decades, with the younger generations standing to lose the most over their lifetime.”

Insurance protection risks

There are also concerns about access to insurances, including income protection and Death, Total and Permanent Disablement protections, should balances drop so low the premiums cannot be paid.

“People also need to consider that they may lose insurance cover they hold through their super if their balance significantly drops and there is an insufficient amount in the account to fund insurance premiums,” Griffin said.

“For many Australians, this is the only insurance cover they may have for Death, Total and Permanent Disablement or Income Protection. Please note, the type of insurance cover provided will vary between super funds).”

The other key factor is withdrawing funds now, as global markets are heavily impacted, means those losses will be locked in as they would be if you were to sell your house at the bottom of the market.

“The ongoing global health crisis has also caused uncertainty in financial markets, resulting in negative investment returns across Australian superannuation funds in recent months, as the pandemic has evolved. Members who withdraw funds early will unfortunately lock in these losses, it’s a similar concept to selling a house at the bottom of the market,” he said.

Superannuation housekeeping

“For people who are eligible, there’s a few things that could slow down the application and payment processes,” Griffin said.

“MyGov shows your super balance at 30 June 2019. For some people, that may mean it doesn’t show they have the full $10,000 available in their super account to withdraw.

“We’re also urging members to check their details are correct and consistent across their super and myGov accounts. If details don’t match it could delay payment while extra verification is undertaken.

“And, sadly, people need to be aware of scammers asking for payment to help them apply for early access to their super, or asking them for personal information.”

JobKeeper scheme

The $130 billion $1500-a-fortnight JobKeeper payment was also part of the federal government’s economic survival package.

This was introduced after the superannuation provision was announced and Griffin is hopeful this will mean less people need to access their super early.

“The JobKeeper scheme will help up to an estimated 6.7 million Australians affected by COVID-19. The figures from the government indicate that the $1,500 per fortnight payment is equal to 100% of the average salary of the industries most heavily impacted like retail and hospitality.

“We’re committed to helping our members retire in comfort and supporting them through this tough time, and we want to make sure people are making informed decisions. Our job is to help people understand the potential impact of accessing their super early, and to facilitate payment quickly and efficiently if their application is approved.

“Down the track, when people have greater employment or income certainty and are more financially stable, we’ll be here to help them take steps to top-up and boost their superannuation savings.”

For further information please contact Media Super.

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