Young people, women, single parents and the unemployed paid a “high price” by taking out early release of superannuation payments during the COVID-19 pandemic according to new research from the Association of Superannuation Funds of Australia.
The research from ASFA released this week has given a “retrospective look” to the controversial scheme that granted Australians the ability to withdraw $20,000 from the superannuation accounts over two tranches during 2020.
ATO data indicated that between 20 April 2020 and 31 December 2020, the tax office received 4.78 million applications with a total of $39.2 billion of superannuation requested for early release.
ASFA deputy chief executive Glen McCrea said the scheme was successful in making a large number of payments in a short period of time.
“However, young people, women, single parents and the unemployed paid a high price in terms of the cost to their retirement savings,” he said.
When it came to reasons for applying for early release, 44 per cent of members cited a reduction in working hours, 19 per cent were unemployed and 18 per cent were eligible for a government benefit.
Younger people were more likely to use the service and 44 per cent applications were made of those under 35 years old despite making up 41 per cent of wage earners.
However, those near or above retirement age also applied to withdraw funds.
“The fact that some applications were made by those aged 65 and over tends to suggest that there is not always a good understanding in the community of when superannuation amounts are subject to release without any conditions,” the report stated.
Around 57 per cent of applications were made by males, while 51 per cent of wage and salary earners are male.
Accounts with remaining balances of less than $1,000 accounted for 1.08 million payments (or 25 per cent) of payments made to members. Approximately 163,000 accounts were fully depleted by early release payments and closed in the June and September quarters.
The money taken out of the account will have a long-term impact of retirement savings with the loss of compounding interest.
According to ASIC’s Moneysmart calculator, a 30-year-old who took out $10,000 now will have an estimated $21,516 less in retirement, the report stated. If the person took out $20,000 over both rounds, they could stand to have $43,032 less in retirement, if the money is not replenished.
However, the report also noted that the Moneysmart calculator doesn’t take into consideration many of the early release payments were taken out at the bottom of the market.
