Early release of super was the topic most frequently asked about by advisers’ clients during March and April as the government sought to limit the fallout from the Coronavirus, according to new figures from AMP’s technical adviser support team.
The next most asked about issue was minimum pension drawdowns as the government relaxed the rules and retirement balances were hit by the volatility in financial markets.
This was followed by enquiries about the federal government’s JobSeeker payment and JobKeeper wage subsidy.
AMP Technical Strategy Manager John Perri said the government was making it relatively easy to apply for super withdrawal, so people needed to carefully consider their decision and ensure they met the eligibility criteria.
“This is a great initiative by the government, which is supporting Australians doing it tough, but it will impact retirement balances. We’re therefore encouraging people to make sure they understand the implications and all available options to support their finances before applying for early release,” Mr Perri said.
ASIC’s retirement savings calculator shows that someone aged 25 withdrawing the maximum $20,000 this year would have $47,000 less in today’s dollars by the time they retired at 67.
Mr Perri said a range of measures were available to help people through a period of lost income, both from the government and private sector, such as the mortgage payment pause offered by the banks.
AMP has launched a new website to help people with the decision to access super early.
Similarly, Mr Perri said those seeking to apply for the fortnightly JobSeeker payment of $1,150 (which includes the $550 Coronavirus supplement) should be aware that while eligibility requirements like the assets test had been relaxed because of the virus, other measures like the suspension of the activity test would only apply until 22 May 2020.
The change in the minimum pension drawdown rules was welcome but also came with additional considerations, Mr Perri said.
Retirees with account-based pensions should be aware that the change applies to both the 2019-20 and 2020-21 financial years. For 2019-20, some retirees may have already received their reduced minimum pension and may not want to draw any more income so as to preserve their assets against investment market falls. For the new financial year, retirees drawing the minimum may only receive the reduced minimum (for example, 2.5% if aged 65 to 74, rather than the standard 5%).
“Retirees with account-based pensions and drawing the minimum payment should check to see how their provider is treating the change from 1 July 2020 to prevent being paid more or less in pension than they want for the year,” Mr Perri said.