Coronavirus (COVID-19) And Your Super
Since the coronavirus outbreak (now referred to as COVID-19), discovered in China in December 2019, there has been heightened press coverage and investment market volatility. Along with health concerns, you may be worried about the potential economic impact – particularly when it comes to the effect on your super investments.
As always, our message remains that superannuation is a long-term investment. History has shown that short-term periods of negative returns and volatility – while stressful – are entirely expected and part of the normal journey for the growth of long term superannuation investments.
There are a variety of events that can, and have, caused share market volatility over the years – from recessions and tech bubbles, the 9/11 terrorist attack in the US, natural disasters like tsunamis, the Global Financial Crisis (GFC), and more recently Brexit. Right now, it is a global health event. Each of these events have resulted in market falls and periods of volatility, but without fail there has been a corresponding bounce-back and a continued trend of increased investment value and returns over the longer-term.
When it comes to determining what you should do during this period, the first step is to not panic, and for most people the next step is to do nothing. Every crisis and every market downturn comes to an end – there has never been an exception to this rule and it is highly likely the result will be just the same this time around.
We always caution against making investment decisions driven by emotions, like fear. Taking quick, reflex actions could result in you locking in the negative, point-in-time returns occurring currently due to this period of volatility.
Federal Government Super changes
On 22 March 2020 the Federal Government announced changes in support of Superannuation members impacted by COVID-19. We’re working through these recent announcements and encourage you to refer to this blog post regularly for updates.
Temporary reduction in minimum drawdown rates for retirees
For Pension accounts, the Government is reducing the amount required to be drawn down by 50 per cent for the 2019-20 and 2020-21 financial years. For more information, please refer to the government factsheet.
Temporary early release of superannuation
From 20 April, members who satisfy the eligibility criteria will be able to access up to $10,000 of their superannuation in 2019-20 financial year and a further $10,000 in 2020-21. For more information, see the frequently asked questions below or refer to the government factsheet.
Am I eligible?
To apply for early release, you must satisfy any one or more of the following requirements:
- you are unemployed; or
- you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
- on or after 1 January 2020:
- you were made redundant; or
- your working hours were reduced by 20 per cent or more; or
- if you are a sole trader – your business was suspended or there was a reduction in your turnover of 20 per cent or more.
How will accessing my super now impact my long-term goals?
We recognise the financial hardship being suffered by a large proportion of the community. However, with all decisions, we encourage members to carefully consider their individual circumstances including their long-term financial situation, objectives and needs – before seeking early access to their retirement savings.
Investment markets have experienced significant losses in recent weeks and there is a risk that unnecessarily accessing your super funds could lead to a compounding negative impact on your retirement outcomes in the long-term.
If you’d like to discuss your options with a professional, we can put you in touch with a financial adviser. Call us on 1800 025 241.
How do I apply?
You can apply directly to the ATO through the myGov website: www.my.gov.au or over the phone from 20 April, if you meet eligibility conditions.
Applications for the 2019-20 financial year must be submitted between 20 April – 30 June 2020, and for the 2020-21 financial year between 1 July – 24 September 2020.
What is the online application process?
Upon logging into your myGov account, you will be asked to:
- acknowledge and certify that you are eligible for early release of super
- input the amount (up to a maximum of $10,000) you would like to release from your super account. Note: if you wish to access money from more than one super account, the total amount cannot exceed $10,000.
- input your bank account details for which the money is to be paid into.
After the ATO has processed your application, they will issue you with a determination. The ATO will also provide a copy of this determination to us. Upon receiving your request from the ATO, we will process superannuation payment as quickly as possible to your nominated bank account.
Separate arrangements will apply if you are a member of a self-managed superannuation fund (SMSF). Further guidance will be available on the ATO website.
What is Nationwide Super doing?
Your financial security is our priority
First and foremost, our risk management practices are something we take very seriously. Your financial security is always our number one priority. Nationwide Super is powered by Russell Investments, with over 80 years investment experience globally. Over decades, Russell Investments has guided many of the world’s largest investors and millions of investors just like you through market events like these, and have learnt to be careful, disciplined and deliberate in any actions we take. Russell Investments has a robust global business continuity program that includes incident management, health and safety precautions and backup facilities.
The Russell Investments philosophy remains solid, and our investment approach is focused on the medium to long-term investment objectives of our members. The construction of our diversified investment portfolios ensure that we remain well balanced and diversified across various asset classes, industries and regions.
Our investment experts are closely monitoring the market outlook, assessing portfolio risks, and fine-tuning portfolio positions. We have trading operations in all major time zones so can move quickly if required. The global team of economists, strategists, analysts and portfolio managers have lived and learned through many market cycles and volatility events and are well prepared to manage your money in all market conditions.
Keeping you informed
While we can’t predict with any certainty how this situation will evolve, we are committed to keeping you to up to date with the latest news and likely impacts to the global economy and investment markets. The team are monitoring developments closely, and during this period of volatility our strategists are committed to producing frequent market updates in response to the ongoing crisis, keeping you informed on global markets and potential impacts.
See the latest updates on the Russell Investments website here.
GoalTracker – taking extra care
We informed members in late February that we are enhancing our super offering with GoalTracker: a new and better way to do super. One of the benefits of GoalTracker is that it’s designed to take the worry and emotion out of trying to choose your investment strategy – over the course of a working life. It can personalise an investment strategy that is better suited to each individual – based on their goals and personal situation.
We will continue to prepare and launch GoalTracker. However, given the uncertainty and volatility in investment markets, we are taking extra precautions in the roll out of these enhancements. This means GoalTracker will now be launched in phases.
What should members do?
While superannuation balances may appear to be negatively impacted in the short-term by the current market volatility, this is not necessarily a cause for concern. Keep in mind that:
- Share markets have performed very well in recent years. History has shown that short-term periods of negative returns and volatility are entirely expected and part of the normal journey for long term superannuation investments.
- Members invested in diversified investment options are invested across a mix of assets which includes lower-risk assets like cash and bonds, which can help cushion the impact of any share market falls. It’s also worth repeating that superannuation is a long-term investment and markets have always recovered from crises of this nature and gone on to increase over time.
- There can be significant risk involved when switching investment options during periods like this, as you can effectively ‘lock-in’ current negative returns, instead of riding out the wave of volatility and staying on course to your longer-term goals.
So, in short, for most members the answer is to do nothing. Every crisis, recession and downturn comes to an end and markets recover – and it is highly likely this crisis will be the same.
For any member who is concerned about the impact of this current crisis on their super savings and may be considering a change to their investment options or appetite to risk, we would encourage you to get in touch – getting help and advice from a professional investment adviser is only a phone call away.
To get started simply call 1800 025 241.