HESTA warns on dangers of early super withdrawal for young ECEC employees
Amongst the many measures adopted by the Australian government in response to the economic impact of the COVID-19 pandemic was a decision which allowed those financially affected by COVID-19 to access some of their superannuation early, accessing $10,000 in the 2019-20 financial year, and an additional $10,000 in 2020-21.
Data collected from HESTA members showed this as a popular option for younger women, who have “drained their super, decreasing their balances by between 60-78 per cent” – a decision which has left HESTA concerned for a future where those women “will face a widening gender super gap and greater long-term financial vulnerability.”
The issue of superannuation and financial vulnerability for those in the early childhood education and care (ECEC) sector is one which has been raised as a point of concern in the past, with research from Monash University identifying how the gender pay gap impacts from
For the early childhood education and care (ECEC) sector, this news is especially pertinent, with 97 per cent of the workforce being female, and with increased attention being placed on addressing the low rates of pay within the sector, which many identify as a core reason for the high staff turnover in this space.
The 2016 National Early Childhood Education and Care Workforce Census showed the median age of female ECEC workers is 34, making the issue particularly of interest to ECEC, which skews both ‘female’ and ‘young’.
In response to the concerns, HESTA CEO Debby Blakey said the Federal Government’s Retirement Income Review Panel should “urgently consider the impact of the early release superannuation scheme on women’s retirement outcomes.”
“We understand how challenging the economic impact of COVID-19 has been for many people. The early release super scheme has provided vital short-term assistance for our members but if urgent action is not taken these young women risk facing a greater vulnerability to poverty as they age” Ms Blakey said.
Echoing concerns expressed by KU CEO Christine Legg, in outlining her choice to participate in the Vinnies CEO sleepout, Ms Blakey said “we already know that women over the age of 55 are the faster growing group of people experiencing homelessness and unless we reform our super system to make it fairer for women and the lower paid we are consigning the next generation of Australian women to the same grim reality.”
Approximately 62 per cent of female HESTA members who claimed their super under the early access scheme applied for the full $10,000, and just over half of members who accessed their super early under the scheme were aged between 24 and 39.
“Most concerning is that these members were also more likely to be lower paid,” Ms Blakey said, saying that those who accessed their super early typically earned between 9 per cent to up to 14 per cent less than the typical member in their age group, making it that much harder to rebuild their super over the long-term.
The impact on the account balances of the youngest cohort of members who accessed their super was also significant. Members aged between 18-24 have virtually drained their super accounts, leaving this group with a median account balance of just $1049, a median decrease of around 78 per cent. Members aged 25-39 also saw big falls in their super balances.
In its submission to the Federal Government’s Retirement Income Review, HESTA has called for a range of measures to create a fairer super system for women and lower paid workers.
HESTA’s recommendations to the review panel include:
- Unpaid caring roles be valued in an appropriate way that recognises the economic contribution made by this work;
- Superannuation be paid on Commonwealth Paid Parental Leave;
- The $450 threshold for Superannuation Guarantee payments be removed;
- Superannuation entitlements are provided for workers who are not classified as employees and/or perform non-standard work;
- The Superannuation Guarantee rate move to 12 per cent as soon as possible;
- The taper rate for the age pension be reviewed;
- The process for superannuation splitting in the event of relationship breakdown be improved; and
- The value of insurance in super for low income earners be recognised
“We’ve been strong advocates for reform of the super system to make it fairer for women and the lower paid,” Ms Blakey said.
“Women are already well behind men when it comes to saving for retirement. We don’t want to see younger women paying an even great price later in life because of a superannuation system that has a gender blind spot.”
More information about the implications of early superannuation withdrawal may be accessed here.