Economic hit of early super release ‘a lot smaller’ than feared

The government’s early superannuation release scheme, brought in to help with the economic hit of COVID-19, has copped criticism from many vocal critics, including Paul Keating.

But Grattan Institute economist Brendan Coates says the hit to a person’s retirement income if they withdraw funds under the scheme is smaller than many feared.

According to Grattan Institute research, the average middle income earner who takes out the full $20,000 amount allowed under the scheme will only be about $900 a year worse off in retirement.

“It’s a lot smaller than some of the numbers that have been bandied around,” Mr Coates told Ross and Russel.

“Yes, if you take $20,000 out of your super, you will miss out on those compounding returns.

“But the flip side is that you’ll probably get a larger aged pension, certainly if you’re anything like a middle-income earner.”

The older you are, the smaller the hit.

“The hit to your retirement income is less the older you are because you’re missing out on compounding for fewer years of your working life,” Mr Coates said.

But there is one problem with the scheme.

“At the moment you don’t have to prove you’re eligible to take the money out,” Mr Coates said.

“You should only be taking the money out if you’re eligible.”

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