Opinion: Super is down for the public sector too and this is a moment for learning

By Bill Tsouvalas

November 10, 2020

Applications are open for the ATO’s program for 2021 and 2022 school leavers. (waelkhalil/Adobe)

If you work in the public sector, you know about the Public Sector Superannuation Scheme. The Public Sector Superannuation Scheme ranks fourth in terms of total assets under management – approximately $83.3 billion.

Many of our government officials have been telling the public at large that “we’re all in this together” when it came to COVID-19 restrictions.

Some people, especially in Victoria’s retail and hospitality sector, have not seen any significant income from their employer since March.

The line becomes very tired, very quickly to these people.

We wanted to know if everyone was in it “together.” So the team at Savvy ran a poll of 1,000 Australians to determine how they’re faring with their finances amid COVID-19 restrictions.

Of those surveyed, 16.1% said they cashed out their $10,000 of superannuation, under the early release scheme.

According to the Australian Taxation Office, 2.5 million Australians have withdrawn $27 billion from their superannuation as of the 5th of July.

In our survey, a majority (54%) spent the super on personal expenses. This is almost like cutting your nose to spite your face. A TV, hi-fi, or new drum kit might keep you occupied during lockdown, but it doesn’t help you in retirement.

We’ve estimated that taking out the amount from super means $30,000 to $90,000 less money in your retirement account. Super Consumers Australia estimates that a 30-year-old withdrawing the maximum amount of $20,000 would have $49,823 less at retirement.

That means few people in the public sector have drawn on their super. But some have – 5% according to the Association of Superannuation Funds of Australia.

When so many people withdraw from funds, it shrinks the pool of the fund, which means fewer dividends and returns. The missing money must be recouped somehow. Though an individual fund will suffer if it’s drawn upon prematurely, a collective fund will also suffer the blow. There will be a gaping hole where money used to be – and that money was invested to make even more money.

That hole is $27 billion, according to some estimates. Even if super withdrawals are low among the public sector, that’s where we truly are all in this together.

The public/private divide isn’t one-sided any more

There is some resentment among people who are interacting with the public service for the first time in decades – perhaps their lives. JobKeeper has kept 3.5 million Australians away from destitution – employers and employees both. They’ve experienced crashes of MyGov, the federal government’s self-service portal; and public sector workers who are by and large working from home and still drawing a paycheque each fortnight or month. I’m sure some people reading this have been on the receiving end of angry, frustrated workers who want to work, but are unable due to restrictions.

“You don’t know what it’s like,” they may say.

When it comes to super, you will.

Super is what binds the public and private sectors together

The ASFA says that “superannuation is the main financial asset that most Australian workers have” and may very well come to rely on it when retirement comes.

According to recent data, 35% of PSS members have between $1,000 and $24,999 in their super funds. The lower your super fund balance is, the weaker the returns will be relative to people with $1 million in the fund.

Fund members can opt to put away 2% to 12% of their income away in the super fund if they so choose. The more you contribute, the more you will walk away with at retirement.

Right now, the public sector is feeling the brunt of the recession when usually they are insulated from it to a large degree. Though intangible for most of the public sector at the moment, they will feel it when their financial adviser tells them their fund has taken a hit due to the pandemic.

If public sector workers want to maintain a level of retirement income consistent with what they had before the pandemic hit, they’ll need to sacrifice more in personal contributions to their funds.

The public sector should take this as a learning experience – that they are indeed subject to the whims of the market and should feel empathy to those who have lost way more than a bit of superannuation.

If public workers are feeling a sting in their retirement funds, imagine how it must feel for retail and hospitality workers who have seen their super funds go almost entirely backwards, and their savings, too. Our survey says that 53.3% of our respondents aren’t saving more money – even though during a recession, that’s what people tend to do.

During this recession, much of the public service may not have direct experience of losing a livelihood.

However, they should look at their superannuation fund and realise, at least when it comes to that metric, we really are in this together.

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