Super scheme lacks certainty for women to rebuild savings

Superannuation is claiming major headlines as more people withdraw funds due to COVID-19 but what's needed now is a plan to rebuild balances.

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This Financy article was first published on Yahoo Finance. If there’s one good thing that’s come from the Federal Government’s superannuation early release scheme, it’s that more Australians are talking about their retirement money.

“We have seen a significant increase in calls and visits to our website so it has increased engagement around superannuation and hopefully that continues,” says Colonial First State’s General Manager of product and marketing Kelly.

The theory has always been that if you can increase engagement around superannuation, then by default it should also help to increase account balances through more top ups and admin tidy ups.

But now a challenge is brewing particularly among Australian women, many of whom are at risk of facing greater financial insecurity because of job losses and the early release scheme.

“There is no certainty for women to be able to rebuild their super in the current environment,” warns Pascale Helyar-Moray chief executive of SuperRewards.

The average Australian woman has only $45,000 in her superannuation account while the average man has $65,000 according to the median account balance reported by the Australian Bureau of Statistics for the 2017-18 financial year.

There are two reasons to be concerned about these numbers right now.

Firstly, those numbers are pretty much the exact amounts needed to cover a person’s minimum retirement financial for one year – let alone the years in between 67 to 85 (averages for both retirement age and life span.)

Secondly, if a person withdraws $20,000 of their super under the government’s early release scheme, that’s a big chunk of their retirement nest egg gone. For many women it’s half of their super.

New research conducted through a survey of over a 1000 people by investment management firm Challenger found that 83% of women over the age of 40 were now more concerned with their financial security, and 81% were particularly concerned about their income through retirement.

“The adequacy of women’s superannuation savings will likely emerge as an even bigger issue as a result of COVID-19,” says Colonial First State’s General Manager of product and marketing Kelly.

“As an industry this is something that is concerning for us.”

What’s needed is an incentivized plan, perhaps with super fees on pause or probono advice, to help people rebuild their superannuation in a post COVID-19 world.

In the absence of that, Ms Power says there are three simple strategies that can help women to rebuild their super now.

  1. Awareness and understanding. Identify how much you will need for the future and to live a comfortably and dignified in retirement. There are some good tools that allow you to do this such as ASIC’S free Money Smart website. They have a bunch of handy calculators.
  2. Understanding what eligibility, you might have for government support measures such as spousal contributions or the government’s co-contribution payment. The government has a co-contribution to help those that have earned less than $37,000.
  3. Top up your super. If possible, making a small super top up of even $10 a week by salary sacrifice can make a real difference over the long term and how much money you have in retirement.

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