Young women make up half of one fund’s members withdrawing superannuation early under the government’s early release provisions, many of which are low-income earners, according to superannuation fund, HESTA.
The economic impacts of the COVID-19 pandemic, resulting in Australia entering its first recession since the early ‘90s, has put a lot of financial strain on everyday Australians.
To assist struggling Aussies, the Government has allowed for early superannuation release provisions – capped at $10,000 for this financial year, and a further $10,000 next financial year.
It now seems that some of the more vulnerable members of society have been put in the position of needing to dip into their superannuation to get through these unprecedented times.
HESTA research found that nearly 100,000 HESTA members have withdrawn $700 million from their super under the government's early release provisions.
The research also found that:
- Half of early withdrawers are aged between 25 and 39.
- The overwhelming majority are women, and many are lower-income earners.
- The median account balance for HESTA members aged between 18-24 has dropped to $1,049, a decrease of 78 per cent.
- Among those aged 25-29, the median post-claim balance is $3,600, a 68 per cent drop.
HESTA chief executive, Debby Blakey, said: "These women are already vulnerable and now they are going to be more vulnerable."
"Young women are typically lower-income earners, making it harder for them to get back on track."
Gender super gap may grow
Unfortunately, young women being more likely to dip into their super may lead to further growth of the gender super gap.
As it currently stands, the gender pay gap in Australia is 13.9 per cent. However, the gap in superannuation is far worse. According to Industry Super, women currently retire with an average of 47 per cent less super than men. On average, this equates to around $85,000 less for women.
Since the Government announced access to early superannuation release, over 2 million people have withdrawn nearly $15 billion, according to a recent AFR article. For these women withdrawing super early from HESTA superannuation funds, they may lose out on as much as $120,000 in retirement, according to Industry Super Australia.
The repercussions of withdrawing superannuation early may see these Aussies retiring with far less, but may also potentially result in a larger superannuation gap if enough women are dipping into them.
Alternative ways to protect your finances
There are a range of alternatives that Australians considering withdrawing super early may want to do before they dip into their nest eggs - especially those feeling the financial pinch from the COVID-19 pandemic.
1. Talk to your bank
If you’re concerned you won’t be able to pay your bills, reach out to your bank now. If you give them fair warning, they can help to set up payment plans or hardship support, and you may avoid future damage to your credit report through potential defaults. Many banks are offering COVID-19 hardship relief to help Aussies get through this rough period.
2. Ask for loan interest rate reductions
If you have a mortgage, you may want to consider asking for a rate reduction to help lower your home loan repayments. With rates at historic lows, it’s never been a better time to haggle for a lower rate.
3. Switch to lower-rate credit cards
If you’ve lost your job or your income has been reduced, and you have an outstanding balance on your credit card, you may want to consider refinancing to a lower-rate card. Some credit card interest rates run as high as 24 per cent, but there are a range of products with rates under 10 per cent. Keep in mind that not every credit card will allow you to refinance to it. You’ll need to ensure the new credit card’s terms and conditions allow for balance transfers.
4. Seek help where needed
If you need independent help, ASIC’s MoneySmart website has a range of support advice for those struggling with debt. If you need immediate advice, consider reaching out to the National Debt Hotline: 1800 007 007.