ATO has allowed Permanent Residents, International Students, Citizen and other specific visa holders who meet certain criteria to release their super. There has been much discussion about the consequences of this and we want to highlight some of these.
ISA (Industry Super Australia) warns that there will be lesser super at your retirement and the table below states how it impacts you.
Long-term cost of accessing $20,000
Age Starting balance Difference at retirement
25 $20,000 -$120,511
30 $40,000 -$97,214
35 $60,000 -$78,420
40 $79,000 -$63,260
45 $95,000 -$51,030
50 $109,000 -$41,165
Assumptions: Investment return at 7% p.a. (after performance fees) and retirement at Age Pension age of 67. For more details see https://www.industrysuper.com/assumptions/
2. Your current super balance reflects the reduced balance due to investment in shares
Typically, a superfund invests anywhere from 40-70% in shares and given the financial hit the share market has felt, your super balance might be lesser that what it was before.
Bernie Dean, Chief Executive of ISA states, taking out super now is like selling a house at the bottom of market. Leaving the money in super allows itself to recover back to potentially its original state.
3. Life insurance component in super may be lost
ATO states that, insurance may not be available on accounts that
The insurance details are also mentioned in the Trust Deed of your Super Fund. You should consider whether you need to seek financial advice before submitting your application for early release of super. Services Australia’s Financial Information Service Officers can give you free, confidential financial information.
You still have an option to opt in and continue to be covered to avoid any unpleasant surprise.
Also watch out for Scammers, as they are on rife. Never share your myGov credentials to anyone. The Australian Institute of Superannuation Trustees (AIST) has warned that scammers have already begun targeting vulnerable members.
Please note the statements above is for information purpose only and does not constitute a financial advice. The pros and cons and financial implication must be discussed with a licensed financial adviser before taking any financial decision related to Super.