Superannuation withdrawals boost receipients’ non-essential spending
Analytics firm AlphaBeta, a part of Accenture, and credit bureau illion analysed the depersonalised banking data of more than 10,000 Australians who withdrew superannuation during the second tranche of the scheme, which commenced on July 1.
To qualify for early release of super you must be unemployed, have been made redundant or had working hours reduced by at least 20 per cent since January 1 (or a fall of 20 per cent or more in turnover for sole-traders).
But the study found 38 per cent of those who had accessed their super this financial year had not experienced any decline in their income during the COVID-19 crisis, or their loss was fully offset by government support. One in five had experienced an increase in income of 10 per cent or more, raising questions about whether all those dipping into their nest-egg really needed the money.
“The government has amped up warnings on compliance checks and penalties for misuse of this scheme but that doesn’t seem to have stopped withdrawals by many who should not be using it,” AlphaBeta director Andrew Charlton said.
Assistant Minister for Superannuation, Jane Hume, defended the scheme, saying the ability to access a small amount of superannuation had given millions of Australians peace of mind.
“Australians who have made the decision to access their super early can rest assured that the Morrison government trusts them,” she said. “They understand that withdrawing some money now comes with a trade-off down the track – but the decision is theirs.”
The scheme, introduced in March, has allowed those experiencing financial hardship to make a tax-free withdrawal of up to $10,000 from their super accounts last financial year and up to $10,000 this financial year.
Those misusing the scheme could face fines of up to $12,600 and be hit with a tax bill on the withdrawn amount.
Around 2.7 million people have so far withdrawn a total of $33.3 billion in super, far more than the original forecast of $27 billion.
But Ms Hume said that “equates to just over one per cent of the entire super system, just over a quarter of the amount Australians contributed to super last year”.
The analysis by AlphaBeta and illion contrasts with the results of a recent Bureau of Statistics survey in which half of those receiving a super withdrawal told the interviewer they had used it, or planned to use it, to pay bills, mortgages, rent and other debts, while 36 per cent said they had added it, or planned to add it, to savings.
University of Sydney Professor of finance Susan Thorp said the higher-than-expected demand for withdrawals showed many families feel financially vulnerable.
“A significant share of Australian households doesn’t have a buffer of liquid savings, so when the hard times hit many people find themselves cash strapped,” she said.
“I don’t think it’s at all surprising when you relax a condition on a compulsory savings scheme that a lot of people want to withdraw a balance.”
But Simon Bligh, chief executive of illion, warned the effects of early super withdrawal would be felt years down the road.
“A double withdrawal by mum and dad potentially means that a chunk of their retirement saving has now been spent,” he said.
Gambling accounted for 8 per cent of additional spending by recipients in the fortnight after a super withdrawal made since July 1, down from 11 per cent in the first phase.
Get our Morning & Evening Edition newsletters
Matt Wade is a senior economics writer at The Sydney Morning Herald.