Individuals who reached preservation age of 57 last year may gain greater economic relief during the COVID-19 pandemic by invoking the severe financial hardship provisions allowing early access to superannuation benefits rather than commencing a pension, a sector expert has said.
The severe financial hardship rules allow individuals who are yet to reach preservation age to access between $1000 and $10,000 a year from their retirement savings if they have received eligible government income support payments continuously for 26 weeks and can prove they are unable to meet reasonable and immediate family living expenses.
However, SuperGuardian education manager Tim Miller noted the qualifying conditions are different for people who have reached preservation age, which could result in a strategic advantage for this cohort, struggling financially and seeking relief due to the coronavirus shutdown, to use the severe financial hardship provisions rather than commencing a pension in order to access their retirement savings.
“Those who are over preservation age, they can access their superannuation proceeds if they have had a cumulative period of 39 weeks of receiving government income support after [reaching] their preservation age,” Miller said during the latest SuperGuardian adviser webinar held this week.
“[This is relevant] for 57 year olds who hit preservation age 12 months ago. They’re at a stage now where they’re well and truly in that area where they could potentially start to target the 39 cumulative weeks after turning 57 and then they don’t have that $10,000 limit, so the condition of release exposes itself to those clients.
“[This means] accessing money under severe financial hardship for those at preservation [age] may be more beneficial than starting a pension because if they start a pension, then that will count from an asset test point of view for social security [purposes], which inevitably may lead to them being cut off JobKeeper or JobSeeker.
“So it’s one of those things to be mindful of.”