$10 billion in super has now been released early

The most recent figures from the Australian Prudential Regulation Authority (APRA) show more than 1.4 million Aussies have now been granted early access to their superannuation during the economic fallout of COVID-19. 

This data was gathered between April 20 and May 17, and amounts to a whopping $10.6 billion in early paid-out super, with an average payment of $7,510.

The early release scheme allows people facing financial hardship to withdraw up to $20,000 from their super in two instalments across this and the next financial year (before September 24). 

How well do you understand superannuation?

There are many issues to consider when withdrawing super early, from significantly reducing returns you might have made on the investment by retirement to superannuation-related scams. But a new study from global investment firm Russell Investments has shown that super is an enigma for many at the best of times.

Of the 3,000 working Australians surveyed, 67% didn’t know how their super was invested or allowed their fund to take a default investment approach. 

Essential super facts

• Superannuation isn’t a risk-free investment

The report revealed two-thirds of Australians believe their superfunds will automatically reduce risky investments to protect members during economic instability like Australia is experiencing now. This is not the case. Withdrawing money from investments now could mean you’re cashing in at a low point, essentially losing profits which could’ve been accessed when withdrawing in a better position.

• Get to know asset allocation: it’s the key to everything

Your super doesn’t simply sit and grow interest like a savings account – it’s invested into different areas, and this process is called asset allocation. Each area or ‘asset class’, like property, shares, fixed interest or cash, will have a different level of potential risk and reward associated with it. Knowing what these are, how they’re affected by economic shifts, and having some involvement in directing investment in them can impact your super balance.

• You have to be proactive if you want to personalise your super

Around 37% of respondents believed their funds were managed in relation to their personal circumstances like age or employment. But if you don’t opt in to direct how your super is being handled, it’ll be treated with a blanket approach. You might recognise the terms ‘conservative’, ‘balanced’ or ‘growth’ from your first super fund application. These are common names for standardised portfolios of assets allocated on a sliding scale of risk and reward. And you guessed it, ‘conservative’ is the safer option with less potential for extra gains, while ‘growth’ sits on the other end of risk and possible payout.   

Once you’ve got your super sorted, make sure you’ve got a financial back-up plan with our guide to growing an emergency savings fund.