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At the start of the Coronavirus crisis, the Government announced it would allow workers to access their superannuation early to get them through the economic downturn. This was before they begrudgingly agreed to a wage subsidy in JobKeeper.

Now, nearly six months on, nearly 3 million people have taken a total of $36 billion out of their super accounts, according to figures provided by the ATO.[1]

What does this mean for the future of these workers?

A 25-year-old worker who drained their superannuation could face $95,000 less by the time they retire. Not only does this mean that workers who we should be supporting are being told to bail themselves out, it means that the economic effects of coronavirus will now last a generation.

What is the solution?

Firstly, those workers who accessed their superannuation need urgent guidance on how to plan for their future in retirement – this needs to be done immediately to ensure the maximum timeline to achieve this. Workers can speak with their superannuation fund or financial advisor to get this planning under way.

On 1 July 2021, the super you get is set to increase to 10%. The Morrison government has argued this should be vetoed but recent media reports suggest the increase will occur. We will know more when the Federal Budget is handed down in May.

For an average waged worker, an extra 0.5% superannuation guarantee is about a $5 a week increase in the super, but that could mean about $70,000 more in super by retirement.

Not all workers have the same retirement prospect

Many workers, particularly women and Aboriginal and Torres Strait Islander workers, face terrible retirement outcomes. Women retire with 47 per cent of the superannuation of men, on average while older women make up the fastest growing group of homeless people in the country. This is partly due to the $450 per month minimum wage super threshold, and that super isn’t legislated to be paid on parental leave (the only leave it isn’t paid on). There are also workers who are excluded from getting super, including gig economy workers and contractors.

According to CFS, the average super balance for men is consistently higher than women ($88,934 compared to $73,139 in December 2020), but the rate of growth was also faster for men over time.

Source: CFS 2020

CFS said it was a “really large issue” that could be attributed to a number of factors.

“The first is that typically women take career breaks to take time out of the workforce to take care of children. During that period in many cases they’re not paid super, because they are on parental leave or they’re not being paid at all,” she said. “The second, is from a guarantee perspective, superannuation is calculated as a percentage of your wage, so the gender gap in Australia more broadly contributes to the difference.”

Among the 50 to 64 age segment, women who sought financial advice made a 199 per cent higher average voluntary contribution in 2020 than women who did not seek advice.

So, what should you do now?

Watch out for the budget in May as this should confirm the superannuation guarantee timeline.

Speak with your superannuation fund to understand where you are with regards to your future retirement.

[1] https://www.abc.net.au/news/2020-12-30/super-early-release-withdrawal-scheme-superannuation/13021162