Super fund warns self-employed of early release risks

The newly launched superannuation fund targeting the self-employed, GigSuper, has warned its members about the downside of accessing super early if they are left unemployed as a result of COVID-19.

ASFA research shows that 20% of self-employed people have no super savings at all and retire with 50% less super than those who are not self-employed.

That same ASFA research found that the average super balance of a self-employed 30 year old was just $25,000. A 40-year-old self-employed person has an average balance of $40,000.

"Giving this group access to $20,000 of their superannuation without a plan in place that addresses the fallout from this withdrawal, could mean setting them up for a disastrous situation in retirement," GigSuper said.

The government will allow those facing financial hardship as a result of COVID-19 and the subsequent shutdown of many businesses to access up to $10,000 of their super this year and up to another $10,000 next year.

"In what will be a double hit, self-employed people will be withdrawing funds from balances that are currently over 30% off their recent highs, and then they'll struggle to top-up their super fast enough to take advantage of the markets' recovery on the other side of the crisis," GigSuper said.

The fund is calling on the government to create special measures for self-employed people.

They want the government to look at tax incentives and contribution matches to assist self-employed people in recovering their super sooner.

"Failure to do so could mean sending this cohort of people, who are already going to struggle, into an absolute retirement catastrophe," GigSuper said.

The fund offered two examples of self-employed people who might be entitled to access $10,000 from their super this year.

The first was a self-employed virtual project manager named Sarah. She said that her super balance "isn't robust" but $10,000 could "rescue" her as her business slows.

However, she admitted she had not contributed "properly" for the past few years.

A second example was a self-employed HR consultant who said most of her clients had been forced to shut down.

"I have $7000 outstanding in invoices that now won't get paid until these venues re-open (if they do)," she said.

"I need the money to pay for childcare because being a single mum is extra hard with no support and the government supplement just isn't enough."

Read our full COVID-19 news coverage and analysis here.

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