How superannuation changes can help you through the COVID-19 crisis

Paul Rafton , National Leader, Superannuation |

30 March 2020

BDO’s national leader for superannuation, Paul Rafton commented in the weekend edition of the Financial Review on the government’s second round stimulus package focusing on the changes to superannuation.

Super changes: how they can help you through the crisis

Worried about keeping your retirement funds intact or short of cash due to job changes? This is how the new rules work on access to your savings.

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BDO partner, Paul Rafton’s, comments focussed on early access to superannuation, changes to drawdown requirements and pension deeming rates.

Early access to superannuation

(From around mid-April) Eligible individuals will be able to apply online through myGov to access up to $10,000 of their superannuation before 1 July 2020. They will also be able to access up to a further $10,000 from 1 July 2020 for approximately three months (exact timing will depend on the passage of the relevant legislation).

BDO national leader for superannuation, Paul Rafton, commented on the pros and cons of early access to superannuation.

“This is a temporary measure to unlock funds for short-term financial relief from the economic impact of COVID-19.  Some individuals may find the ability to access their retirement savings early necessary but they should weigh up the long term effects on their retirement savings by doing this.”

“If you qualify and you do decide to withdraw funds from your super you need to be mindful that it is not easy to replace your retirement savings and you’ll be playing catch-up for a few years to come. 

“I would recommend people explore all options before taking money out of their retirement future, and of course seek advice.”

Changes to drawdown requirements

The Government is temporarily reducing superannuation minimum drawdown requirements for account based pensions and similar products by 50 per cent for 2019-20 and 2020-21. This measure will benefit retirees by providing them with more flexibility as to how they manage their superannuation assets.

BDO national leader for superannuation, Paul Rafton, commented on the changes to the drawdown requirements and said the measure was similar to the draw down relief provided during the GFC.

Rafton said, “It’s a positive sign from the Government, that self-funded retirees will be able to reduce the amount they need to withdraw from Super to meet the minimum pension payment requirements for both the years ending 30 June 2020 and 30 June 2021.”

“If an individual has already withdrawn enough to meet the adjusted minimum payment requirements then they do not need to withdraw any more money from super before 30 June 2020. However, they can’t simply repay any excess to their super fund without reference to their contributions caps.”

Pension deeming rates

As at 1 May 2020, the upper deeming rate will be 2.25% and the lower deeming rate will be 0.25%. 

BDO national leader for superannuation, Paul Rafton, commented on the reduction of pension deeming rates.

“The reductions reflect the low interest rate environment and its impact on the income from savings.

“Reducing the deeming rates is a positive measure given that the RBA has further decreased interest rates in recent weeks.

“The lower deeming rates are a better reflection to what the market is paying and around half a million pensioners will see an uptick in their pension earnings … however, the lower deeming rate maybe disadvantageous for those pensioners who choose to keep money in a low interest rate environment because the deeming rate maybe more than the interest they actually earn.”