Consumer groups have again urged people only to seek to use the Government’s hardship early access to superannuation regime as a last possible option and to consult a financial counsellor rather than an adviser.
The consumer groups - Super Consumers Australia, Council On The Ageing (COTA) Australia and Choice have issued a formal statement urging people to exhaust all other options before dipping into their super, pointing to Super Consumers Australia modelling has revealed that early access could cost people’s retirement balances the equivalent of $50,000 in today’s money.
The modelling found that, for a 30-year-old, the impact of withdrawing $20,000 would be $49,823 by retirement age.
The groups have also urged people to beware of scammers and people offering to help them take-up superannuation early access for a fee.
Super Consumers Australia director, Xavier O’Halloran said that taking out money before retirement meant losing the benefit of compound interest over a lifetime.
“Depending on how old you are, withdrawing money now could see you having to work much longer to make up the difference before you retire,” he said. “There are a number of financial assistance options to help people through these tough times. Super will be the right option for some, but you should be looking at what else is available and possible cuts to discretionary spending before raiding the cookie jar.”
COTA Australia chief executive, Ian Yates cautioned that people would lose tens of thousands of dollars in retirement savings if they withdraw their superannuation now.
“One of the tragedies of the GFC was that people crystallised their losses by taking their diminished funds out of their super accounts,” he said. “They then had no way of growing them back and at the same time they lost the multiple tax advantages you get from having your savings in a superannuation account.”
“Our message is that if at all possible if your savings are in super, keep them in super. Even if you move your money into a more conservative option within your super fund, you can move it back into a growth fund later. But if you move it out of super, you may not be able to put it back in again.”
“It may not seem important now, but that’s many tens of thousands of dollars that you will not have to support you in retirement," says Yates.
Choice Policy and Campaigns Adviser Patrick Veyret said if people were in financial difficulty, “we encourage them to contact financial counsellors, not financial advisers”.
“Financial counsellors offer a free and independent service. They can help people navigate through financial hardship, access government payments, and assist with any debt matters,” he said. “It will only be in very rare circumstances that a financial adviser recommending early access of superannuation is doing so in your best interests.”