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A super catch-up plan

It's a number that can only be described as mindboggling: $400 million a day.

 

That's the total amount of money that has been withdrawn from Australia's retirement savings system under the federal government's special early release measure since it became effective in late April.

From 20 April, individuals financially affected by COVID-19 have been able to apply online through the myGov website to access up to $10,000 from their superannuation account tax-free this financial year.

So far, around 1.1 million Australians have collectively withdrawn close to $12 billion in superannuation – with an average withdrawal amount of about $8,000 according to the Australian Tax Office.

Superannuation funds, particularly the industry funds with large membership bases covering workers in the hard-hit hospitality and retail sectors, have been flooded with withdrawal requests.

The vast bulk of those requests have been from individuals with less than $10,000 in their accounts, with another sizeable proportion of applications coming from people with less than $20,000 in super.

In the context of Australia's total superannuation system, which is managing almost $3 trillion in assets on behalf of members, the amount that has been withdrawn to date represents less than 0.5 per cent.

However, the volume of superannuation money being taken out of the system is climbing day by day.

There is still over a month until the end of this financial year, and then a second tranche of the superannuation withdrawal measure comes into effect. Individuals who have been made redundant, or who have lost 20 per cent or more of their regular income, can access $10,000 of their superannuation from 1 July until 24 September, 2020.

In many cases, applications are likely to come in from the same individuals who withdrew $10,000 of superannuation savings before 30 June.

The cost of early access

As we've detailed in previous articles, the cost of accessing superannuation early primarily comes down to the forsaking of future compound returns.

For someone close to retirement, let's say less than 10 years away, the net returns cost of pulling out savings early won't be as great as for a younger person.

Our Investment Strategy Group recently did some calculations based on a balanced multi-asset managed fund containing a mix of equities and fixed income, with an average net return of 6 per cent per annum.

For an investor who has 20 years until retirement, the value of a $10,000 withdrawal is estimated to be worth $32,100 at retirement. Over the course of 40 years, the impact of the $10,000 withdrawal on the retirement savings climbs to $102,900, while a $20,000 withdrawal means an investor would have $205,700 less at their disposal.

A way back

It's still very early days, but there's already discussion in financial circles around the need to entice individuals in the post COVID-19 environment – especially those who have withdrawn superannuation – to replenish their retirement savings incrementally over time through additional concessional contributions (taxed at 15 per cent).

This discussion is being framed into the wider debate around the ultimate purpose of superannuation, which is enshrined in the Superannuation (Objective) Bill 2016 as "to provide income in retirement to substitute or supplement the Age Pension".

Last September the federal treasurer announced an independent review into Australia's retirement income system, with the final report from that Retirement Income Review due to be provided to the government by June.

The longer-term consideration for individuals who have needed to withdraw superannuation because of the COVID-19 crisis is perhaps around developing a savings plan for further down the track, once they are in a more stable employment position.

Which could involve allocating small amounts of earnings back into superannuation over a long period in addition to the compulsory employer-paid Superannuation Guarantee levy contributions.

There are also much more generous rules in place now around making larger superannuation contribution catch-ups, well beyond the standard annual limitations.

In our recent article Do your investment goals stack up?, we pointed to the importance of having a financial plan and the need to reassess one's goals when unforeseen events occur, such as those currently being experienced.

In the current environment, the need for having a long-term financial plan that incorporates having adequate retirement savings in place is arguably more than important than ever.

 

Tony Kaye
Personal Finance Writer
26 May 2020
vanguardinvestments.com.au

 


Sam El Shammaa

Sam El Shammaa

Director/Financial Planner

For more than 20 years, Sam has been a financial planner helping individuals and families achieve their financial planning goals, by providing advice on Investment Planning; Insurance Planning; Tax Planning; Retirement Planning; and Estate Planning. Working with a network of highly skilled professionals in Sydney he is dedicated to providing high-quality advice and integrated wealth management solutions that simplify and enhance the quality of his clients' lives.

Sam established his own firm in 1997 and has overseen its steady development and growth. Attention to detail, good listening skills and great empathy are symbols of his appreciation by his clients. He has built long-term relationships with his growing client base and aims to provide excellent customer service.

Sam began his financial planning career in 1993 after completing a Bachelor of Science degree in 1991. Since this time he has accumulated many professional qualifications such as:

Sam has volunteered with the Cancer Council of NSW and can be seen almost every year volunteering or participating in the 7 bridges walk.

Away from the business, he enjoys spending weekends with his son. He is also a football (soccer) tragic and is a massive Chelsea FC fan.



George Pereira

George Pereira

Financial Planner

Having worked for national financial planning companies in the past, George has extensive experience in the provision of advice in risk insurance, investments and retirement planning and is focused on forming long-term relationships with his clients.

George has been awarded a Masters of Commerce (Financial Planning) and a Bachelor of Commerce through University of Western Sydney as well as having the Diploma of Financial Services (Financial Planning).


Jane Lim

Jane Lim

Financial Planner

Jane Lim is a friendly character with a bubbly personality. She has the unique ability of making complex information sound simple and easy to digest.

Jane entered the financial services industry in 2006, and worked with big blue-chip financial companies such as Count Financial Limited and AMP Financial Planning Pty Ltd.

She holds a Master's degree in Applied Finance through Macquarie University, and she is a member of the Million Dollar Round Table.

Being a self-confessed "tennis nut", Jane spends many weeknights in the tennis court, and is a frequent member of Sydney's Eastern Suburbs Tennis Competition.

Being a highly motivated professional, Jane is always eager to help her clients on a wide range of financial planning needs.

Paul Jayashekar

Paul Jayashekar

Mortgage Broker/Financial Planner

Paul has been a financial planner for over 15 years helping individuals and families successfully achieve their financial planning goals. He is very focused on building successful long-term harmonious relationships with his clients.

He provides a holistic approach on various aspects of financial advice encompassing areas such as Investment Planning; Insurance Planning; Tax Planning; Retirement Planning and has extensive experience and knowledge in these fields.

Paul's professional qualifications are:

Away from his professional life, he enjoys spending his time with his family doing various activities such as coaching his son and taking him to games. He is a very avid sports fan and a cricket enthusiast.

Christian Tanadinata

Christian Tanadinata

Client Services Manager

Christian joined Capitalwise as Client Services Manager, with backgrounds in both customer service and administration.

Christian is passionate in providing excellent customer service by being attentive to client’s need as well as being able to circumnavigate challenges.

He holds a Master's degree in Commerce specialising in Marketing through the University of New South Wales.

Volunteering is one of his delights in life, where he had spent time being involved with the Centre for Volunteering, St Vincent de Paul's Society, and Sculpture by the Sea in a variety of positions.

Jenny Zhou

Jenny Zhou

Administration Assistant

Jenny is a University of New South Wales graduate who joined the team as an Administration Assistant. She is keen to put her customer service and organisational skills to use, making sure day to day operations run as smoothly as possible.

Outside of work, Jenny focuses her efforts on karate and ice hockey. She can often be found coaching and practicing karate at her alma mater. The rest of her time is spent at one of Sydney’s many ice rinks playing, practicing, or officiating ice hockey.

Max Reinhardt

Max Reinhardt

Financial Adviser
B Econ (Hons) Cert IV FS (MB) Dip. FS (FP) AFB MeSAFAA

Max has over 20 years experience in the finance and lending industry of which over 15 years has been in financial advice. Max attained a Bachelor of Economics honours degree at The University of Sussex in 2004, after which he settled in Australia with his family.

Max has never stopped studying as he is always looking at ways he can better assist his clients and has studied many courses in financial advice, lending and technical analysis as he continues to try and stay ahead of his competitors in terms of the knowledge he can share with his clients.
Max has worked for several large and successful organisations before starting his own business in 2014. He has gained valuable experience from the likes of Lloyds Bank, American Express, HSBC, General Electric, Commonwealth Bank and Westpac. He draws on this vast experience to benefit his clients whilst bringing a much more personal touch than you would get from one of these larger organisations.

Max’s philosophy is to always put his clients first, which is what makes him so successful and popular with his clients, having built a thriving business primarily through referrals from very happy clients.

In order to better serve you, please select the appropriate contact details for the department you are looking for below.

Department Phone Email
Financial Planning (02) 8599 0835 (Option 1) info@capitalwise.com.au
Accounting (02) 8599 0835 (Option 2) accounting@capitalwise.com.au
Conveyancing (02) 8599 0835 (Option 3) conveyancing@capitalwise.com.au