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How a million Australians emptied their super fund during Covid

About $38 billion was withdrawn from superannuation funds as emergency payments and about 1 million people cleaned out their entire retirement savings, according to an industry analysis.

Aug 11, 2022, updated Aug 11, 2022
Real estate has pushed up our wealth but bank accounts are dwindling (File photo)

Real estate has pushed up our wealth but bank accounts are dwindling (File photo)

The Association of Superannuation Funds Australia said the early release scheme, which was designed by the Government to allow access to retirement savings during the pandemic, was a success, but would have ramifications on those who used the access.

Australians were allowed to access in two tranches for up to $10,000 each. Data from the Tax Office indicated that about $39 billion was applied for through 4.78 million applications and of this amount 232,000 applications were rejected worth $1.4 billion.

ASFA said $38 billion in payments from funds at a time when financial markets were under stress. There was also a higher proportion of applications for access from Queensland, which ASFA attributed to the significant impact the pandemic had on the state’s tourism sector.

“Around 3 million Australians applied for early release, many of them making two applications. Nearly 1 million Australians closed or largely cleaned out their superannuation account as a result of early release payments.

“The cleaning out of accounts was more prevalent for women, single parents and the unemployed.”

ASFA said there were indications that a number of Australians applied for early release, even though they were not entitled to it and that an unspecified proportion of early release payments went to “lifestyle items” and savings outside of superannuation rather than being spent on essential items.

ASFA said data from the Tax Office showed about 28 per cent was used to pay rent, 26 per cent went to bills and 14 per cent went to pay down credit card or personal debt. However, ASFA said the results from the ATO did not seem credible and it was likely there was significant under-reporting of the receipt of payments.

“As well, self-reporting of the main use of the funds would tend to generate more worthy destinations for the liberated amounts than was the actual case,” ASFA’s report said.

It also warned that if a 30-year-old withdrew $20,000 in 2020 under the scheme they would have $43,000 less in retirement at the age of 67.

The biggest reason for applying for the funds was because of reduced work hours.

ASFA deputy chief executive Glen McCrea said these people paid a high price for the access.

“While superannuation was able to do so much of the heavy llifting by distrubuting payments to people quickly in the early days of the pandemic, it’s important that we recognise the detrimental impact thay this has had for the retirement savings if millions of Australians,” he said.

Despite the massive withdrawal, funds still retain about $3.4 trillion.

 

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