While it might be tempting to alleviate COVID-19 financial distress with early access to superannuation, the National Debt Helpline is urging Australians to avoid making rash decisions.
Instead, the free helpline – a not-for-profit service – is urging Australians who have lost their jobs or had their hours reduced to first talk to one of its professional financial counsellors about tackling debt problems and getting through the next few months.
Director of Community Outreach with the National Debt Helpline Maura Angle says the path forward could include other options.
“We look at alternatives such as accessing financial hardship arrangements with lenders and government COVID-19 financial assistance,” says Ms Angle. “The helpline is free, confidential and independent, so there’s nothing to lose by calling. We help people get back on track and have ideas that callers might not have thought about.”
Ms Angle says it is important that people in financial distress act quickly.
“Don’t wait for your bills and debts to spiral out of control and for your financial problems to become more complex,” she says.
With the Australian Bureau of Statistics reporting that the country’s unemployment rate has increased to 7.1 per cent and the number of unemployed by 85,700 people in May, many more Australians might be considering accessing their super.
The government announced on 22 March 2020 that eligible citizens and permanent residents of Australia can apply to access up to $10,000 of their super until 30 June and a further $10,000 from 1 July to 24 September.
The National Debt Helpline also has an online COVID-19 Financial Survival Guide and other information and tools on dealing with debt and finances during these unprecedented times.
“The financial counsellors don’t provide investment advice or sell products or make money from those who call,” says Ms Angle. “They’re trained as good listeners, are non-judgmental and qualified to help map logical next steps and put people in touch with legal, crisis, food, accommodation and health services.”
One call came from an anxious woman in her mid-30s with children. Her work hours were reduced and to fill the gap she thought early access to super was the only option. After talking to a National Debt Helpline financial counsellor, she went to her bank and received COVID-19 hardship support. The result was that she avoided dipping into her super.
If accessing some superannuation early is the best option, Ms Angle says it is important to remember that superannuation is there for the future.
“If you access it now, it may have a significant impact on how much money you’ll get in your retirement,” she says. “It should be a last resort.”
Chris Oates, a Certified Financial Planner in Canberra at RSM Financial Services Australia, agrees that early access to superannuation needs to be carefully thought through.
“If a person in their 20s takes $10,000 out of their superannuation today and doesn’t replace it, they would lose a fair bit of retirement money,” says Mr Oates. “Based on an average return of 6 per cent over 40 years, which would take them to age 60, they would probably lose $100,000 to $150,000. If returns are higher than that, they could even lose around $200,000.”
The National Debt Helpline is open 9.30 am to 4.30 pm Monday to Friday on 1800 007 007 or visit National Debt Helpline.
Care Inc manages the National Debt Helpline for Canberra and the surrounding region.