Number of people dipping into super drops to record low: APRA

Number of people dipping into super drops to record low: APRA

The number of people dipping into their retirement fund to fare the coronavirus pandemic has reached an all time low, but industry groups warn the damage to the financial wellbeing of younger generations is already underway.

About 70,000 people withdrew up to $10,000 from their superannuation account under the government’s early release of superannuation scheme in the week ending 16 August, according to APRA data. Of them, about 30,000 were repeat applications, tapping a maximum of $20,000 from their retirement nest egg.

The $601 million withdrawn in that week was an all time low since the initiative was introduced in late April, besting the previous low set one week earlier of $711 million.

At the height of its popularity, when the government authorised the second-dipping of superannuation, more than 580,000 people withdrew $6.19 billion from their superannuation accounts, in the week ending July 12.

The early access to superannuation scheme was a government initiative introduced to help people hedge the loss of income they were experiencing as a result of the COVID-19 pandemic. Since the scheme’s introduction, about 4.1 million superannuation members have received $31.7 billion.

The average payment made during the week ending on 16 August was about $7686 for first time applicants, and $8468 for people who withdrew funds from their superannuation a second time.

A study of banking data found the first withdrawal of superannuation was used to pay down debts, while repeat dippers spent more on essentials, including groceries, car maintenance and clothing.

The scheme has led to more than 600,000 superannuation funds being emptied out, according to a recent Grattan Institute report.

A hundred billion dollar retirement gap: AIST

A not-for-profit group is calling for subsidies and a ‘crucial’ investigation into the long term consequences into the government’s early release of superannuation scheme, claiming vulnerable groups will be $100 billion worse off when it comes time for them to retire.

An analysis of aggregated fund data, commissioned by industry group Australian Institute of Superannuation Trustees (AIST) and undertaken by consultants Mercer, found low paid workers, women and people with insecure jobs could be shouldering an estimated $100 billion shortfall in retirement funds because they withdrew from their superannuation to cope with COVID-19. 

“The early release scheme unfortunately forced many people to choose between poverty now or poverty in retirement,” Eva Scheerlinck said, chief executive of AIST. 

“Catching up contributions later in their working life will cost significantly more than the amount withdrawn and will be difficult to achieve for many low-income earners.”

The research found people with lower superannuation balances -- by 20 per cent, on average -- were more likely to make a withdrawal, and that many who did were younger.

A fifth of people aged 25 to 34 made a withdrawal, and the average withdrawal amounted to a third of their available superannuation funds. About 15 per cent, AIST estimates, drained it altogether before 30 June.

Women withdrew more money from their superannuation than men on average, the analysis found.

The estimated $100 billion shortfall would need to be funded by future governments and Australian taxpayers in the form of higher pension payments, Ms Scheerlinck said. 

Separate modelling by The Grattan Institute supported this conclusion

Dr David Knox, a senior partner at consultancy firm Mercer, said questions remained regarding the consequences of the early release of superannuation scheme.  

“It is crucial that we investigate and understand the longer term consequences of the early release scheme,” he said.

AIST is calling on the federal government to offset the retirement losses low paid workers, women and people in insecure jobs will endure. These include a: 

  • One-off government contribution of $5000 to people who earned less than $39,837 and accessed their superannuation
  • Increasing the Government superannuation co-contribution rate and threshold
  • The removal of the $450 minimum SG threshold and super on paid parental leave.

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Learn more about superannuation

Can I buy a house with my superannuation?

First home buyers are the only people who can use their superannuation to buy a property. The federal government has created the First Home Super Saver Scheme to help first home buyers save for a deposit. First home buyers can make voluntary contributions of up to $15,000 per year, and $30,000 in total, to their superannuation account. These contributions are taxed at 15 per cent, along with deemed earnings. Withdrawals are taxed at marginal tax rates minus a tax offset of 30 percentage points.

Voluntary contributions to the First Home Super Saver Scheme are not exempt from the $25,000 annual limit on concessional contributions. So if you pay $15,000 per year into the First Home Super Saver Scheme, you have to make sure that you don’t receive more than $10,000 in superannuation payments from your employer and any salary sacrificing.

Is superannuation included in taxable income?

Superannuation is not included when calculating your income tax. So if you have a salary of $50,000, your assessable income would be $50,000, not $50,000 plus superannuation.

That said, superannuation itself is taxed. It is generally taxed at 15 per cent, although if you earn less than $37,000, you will be reimbursed up to $500 of the tax you paid.

When can I access my superannuation?

You can withdraw your superannuation when you meet the ‘conditions of release’. The conditions of release say you can claim your super when you reach:

  • Age 65
  • Your ‘preservation age’ and retire
  • Your preservation age and begin a ‘transition to retirement’ while still working

The preservation age – which is different to the pension age – is based on date of birth. Here are the six different categories:

Date of birth Preservation age
Before 1 July 1960 55
1 July 1960 – 30 June 1961 56
1 July 1961 – 30 June 1962 57
1 July 1962 – 30 June 1963 58
1 July 1963 – 30 June 1964 59
From 1 July 1964 60

A transition to retirement allows you to continue working while accessing up to 10 per cent of the money in your superannuation account at the start of each financial year.

There are also seven special circumstances under which you can claim your superannuation:

  • Compassionate grounds
  • Severe financial hardship
  • Temporary incapacity
  • Permanent incapacity
  • Superannuation inheritance
  • Superannuation balance under $200
  • Temporary resident departing Australia

 

How do you find lost superannuation funds?

Lost superannuation refers to savings in an account that you’ve forgotten about. This can happen if you’ve opened several different accounts over the years while moving from job to job.

You can use your MyGov account to see details of all your superannuation accounts, including any you might have forgotten. Alternatively, you can fill in a ‘Searching for lost super’ form and send it to the Australian Taxation Office, which will then search on your behalf.

What are my superannuation obligations if I'm an employer?

Employers are required to pay superannuation to all their staff if the staff are:

  • Over 18 and earn more than $450 before tax in a calendar month
  • Under 18, work more than 30 hours per week and earn more than $450 before tax in a calendar month

This applies even if the staff are casual employees, part-time employees, contractors (provided the contract is mainly for their labour) or temporary residents.

Am I entitled to superannuation if I'm a casual employee?

As a casual employee, you’re entitled to superannuation if:

  • You’re over 18 and earn more than $450 before tax in a calendar month
  • You’re under 18, you work more than 30 hours per week and you earn more than $450 before tax in a calendar month

How do you open a superannuation account?

Opening a superannuation account is simple. When you start a job, your employer will give you what’s called a ‘superannuation standard choice form’. Here’s what you need to complete the form:

  • The name of your preferred superannuation fund
  • The fund’s address
  • The fund’s Australian business number (ABN)
  • The fund’s superannuation product identification number (SPIN)
  • The fund’s phone number
  • A letter from the fund trustee confirming that the fund is a complying fund; or written evidence from the fund stating it will accept contributions from your new employer; or details about how your employer can make contributions to the fund

You might want to provide your tax file number as well – while it’s not a legal obligation, it will ensure your contributions will be taxed at the (lower) superannuation rate.

How do you calculate superannuation?

Superannuation is calculated at the rate of 9.5 per cent of your gross salary and wages. So if you had a salary of $50,000, your superannuation would be 9.5 per cent of that, or $4,750. This would be paid on top of your salary.

The ‘superannuation guarantee’, as it is known, has been at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

How is superannuation calculated?

Superannuation is calculated at the rate of 9.5 per cent of your gross salary and wages. So if you had a salary of $50,000, your superannuation would be 9.5 per cent of that, or $4,750. This would be paid on top of your salary.

The ‘superannuation guarantee’, as it is known, has been at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

What is salary sacrificing?

A salary sacrifice is where your employer takes part of your pre-tax salary and pays it directly into your superannuation account. Salary sacrifices come out of your pre-tax income, whereas personal contributions come out of your after-tax income.

What are concessional contributions?

Concessional contributions are pre-tax payments into your superannuation account. The payments made by your employer are concessional payments. You can also make concessional contributions with a salary sacrifice.

How much is superannuation in Australia?

Superannuation in Australia is currently 9.5 per cent – which means that your employer must pay you superannuation equivalent to 9.5 per cent of your salary.

The ‘superannuation guarantee’, as it is known, has been at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

When did superannuation start?

Australia’s modern superannuation system – in which employers make compulsory contributions to their employees – started in 1992. However, before that, there were various restricted superannuation schemes applying to certain employees in certain industries. The very first superannuation scheme was introduced in the 19th century.

What are reportable employer superannuation contributions?

Reportable employer superannuation contributions are special contributions that an employer makes on top of the regular compulsory contributions. One example would be contributions made as part of a salary sacrifice arrangement.