Early access not so super for women

Money and Life
(Financial Planning Association of Australia)


The COVID-19 crisis has seen many Australians taking steps to stay afloat with their finances. With women more likely than men to withdraw super to make up the shortfall in their income, what does this mean for their long term financial wellbeing? Fran Hughes CFP®, Head of Financial Solutions explores the reasons why a super withdrawal at this time could leave women financially vulnerable.

The Australian Government’s early access to superannuation scheme has seen 1.63m Australians[1] raid their retirement savings to cushion the financial blow of the COVID-19 economic fallout. The scheme, which allows a withdrawal of up to $20,000 over two financial years from April to September 2020, has recorded an average draw down of $7,476 per person[2] in the first tranche. According to analysis from AMP, 21 per cent of women have already withdrawn their super balances, compared with 17 per cent of men[3].

A recent report released by the Australian Prudential Regulation Authority (APRA)[4] reveals the top four superannuation funds with the highest number of withdrawal applications were Australian Super, Hostplus, Sunsuper and the Retail Employees Super. These funds represent the highest proportion of members that work in hospitality, tourism, recreation, sport and retail, and paints a bleak picture of the industries most affected. Given that women represent more than 55 per cent of employees[5] in these sectors, a withdrawal of $20,000 could seriously undermine future financial security for women taking up the scheme.

Here are 5 reasons why: 

1. Mind the gap

Recent figures from the Australian Bureau of Statistics (ABS)[6], found the average superannuation balance for women aged 25 to 34 was $33,200, aged 35 to 44 is $69,300, and aged 45 to 54 estimated at $129,100. A withdrawal of $20,000 could potentially mean a reduction from $33,200 to $13,200, which is a 60% reduction in her superannuation balance. Given that women retire with an average of 40 per cent less superannuation[7] then men, this withdrawal leaves a sinkhole in her retirement savings and further widens the gap.

Industry Super Australia (ISA) calculated that the financial gap from now to retirement equated to $120,000 for a 25-year-old woman who accessed $20,000 of her super, while a 30-year-old would stand to lose out on $100,000, and a 40-year old $63,000. When compared to the average balance of a 65 year-old female’s superannuation at $245,100, you realise the extent of the damage.

2. Playing catch up

You may be thinking, ‘I’ll play catch up and make up the amount down the track’. We recognize that for some, covering the rent or loan repayments now takes priority over their future retirement. However, to recoup the equivalent of $10,000 back into superannuation requires an annual salary of $123,839 paying 9.5 per cent per annum in superannuation guarantee contributions. According to the ABS, the average weekly earnings for a female is $1,508.50 (or $78,442 per annum), which falls short of the six figure income required to replenish the shortfall.

3. Broken working patterns

Perhaps the thought of working extra hours has crossed your mind. Here is a sobering thought. A report from the Association of Superannuation Funds of Australia (ASFA) on Women’s Economic Security in Retirement found that women are more likely than men to be working longer in a part-time capacity. This figure rises to 61% for women who care for family, stay-at-home mums, take a career break to study or are unable to find suitable full-time employment. The report goes on to say that the broken working patterns adversely affect a woman’s security in retirement. 

4. Locking in losses

Chances are, your super is invested in a ‘balanced’ option. The average balanced portfolio has lost 10-12 per cent in the last month, underpinned by sharp falls in equity markets. A withdrawal now could potentially mean that you are withdrawing an amount of $20,000 that would otherwise be valued at $22,727, crystalizing a loss of $2,727, that should have been working for you within your superannuation.

5. Loss of insurance cover

A sizeable withdrawal of $20,000 from your super, combined with regular fund fees and insurance premiums, added to a break in working patterns, could push your account balance below $6,000, leaving you vulnerable to automatic cancellation of insurances within super. According to a report by Lifewise, with 95 per cent of Australians underinsured, you’d want to be sure to hang on to this valuable safety net.

Understandably for some, there may be no other option to keep the household finances afloat during these times, however, it should be considered as the very last resort.

Speaking with a financial planner can help you explore your other options for your finances before making a withdrawal through the scheme. 


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