A Griffith financial planner has indicated a large amount of younger people opting to pull money out of their super may to be reduce current debts, as the one of the nation's largest super fund managers indicates a mass 'wipe-out' of super balances.
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Industry Super Australia (ISA) have unveiled data which indicates 15 per cent of workers in NSW have accessed their super early under the federal government's early release scheme - which allowed workers who had lost their jobs or had hours cut to access $10,000 in super from March and a further $10,000 from July 1.
An estimated $15 billion has been taken out of super accounts to date, with 2.1 million people taking funds under the scheme.
The analysis - based on data from the ATO regarding accounts with less than $10,000 and Treasury statistics on the age distribution of early release of super funds - estimates 480,000 people have wiped out their super before July 1, with the largest demographic those under the age of 35 - which it is estimated 395,000 people have eroded their super as of June 14.
Managing Director of Gunn Accounting Ashley Gunn said while super accounts may have been hit by people withdrawing funds, many who are doing so choose to do it to help reduce immediate debts despite the impact it may have on their retirement savings.
"Many are using it to reduce debt, they feel they're better off using the money now," Mr Gunn said.
"The current economy with the uncertainty around COVID, that would be the main factor [in people choosing to withdraw]."
"It does affect their retirement savings ... I think it's been quoted that taking $10,000 could reduce savings by around $40,000 by the time they [people under 35] retire."
Mr Gunn highlighted there may be an increased interest among younger people identifying how much is in their super funds, as it provides a way to access funds if needed.
The ISA said the analysis follows calls from some federal MPs to can the incremental and legislated increase to the super rate from 9.5 per cent to 12 per cent by 2025.
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ISA chief executive Bernie Dean said without early contributions to a super fund, future savings for retirement may be affected and super should only be accessed as a last resort.
"To have hundreds of thousands wiping their savings out mid way through their life is a tragedy waiting to happen and it will affect everyone," Mr Dean said.
"Every Australian deserves a good life in retirement, not just scraping by on the pension."
"The Prime Minister and Treasurer must stick by their promise to increase the super rate because its critical to helping these people rebuild savings they've wiped out, and avoid tax hikes on working people to prop up more people drawing a full pension."
