Withdrawals under the Coalition’s early super access scheme appear to be tracking in line with government forecasts, with funds having so far paid out $13.5 billion to 1.8 million members.
Withdrawals have been made from a total of 177 super funds and averaged $7473 per member.
The Australian Taxation Office has not released the level of withdrawals from self-managed super funds, but they are believed to be tracking at similar levels to pooled funds.
The early super access scheme allows members suffering financial hardship as a result of the pandemic to withdraw up to $10,000 this financial year and another $10,000 in the first three months of the next financial year.
Although the number of withdrawals is still significant, the rate of withdrawals appears to have slowed in recent weeks.
In the week to the end of May, withdrawals increased 12 per cent and totalled $1.319 billion.
In the week to May 24, withdrawal numbers increased 12.5 per cent.
And for the preceding two weeks, to May 17 and May 10, withdrawals rose 14.3 per cent and 33 per cent respectively.
The slowing rate of withdrawals might not last, however.
Australian Prudential Regulation Authority deputy chair Helen Rowell told a Senate committee last week that although early withdrawals at the time had not been as high as the government had anticipated, she expected to see an “uptick towards the end of the first phase of the scheme”.
That means APRA believes withdrawals are likely to jump again over June.
The question on the minds of regulators and super funds is what will happen in the new financial year.
Many commentators believe the average withdrawal this financial year was below the $10,000 limit as younger people have taken advantage of the scheme and have very low balances in their accounts.
If this is the case, then withdrawals in the second half are likely to be less.
Treasury figures for the period to mid-May show that half of all claims under the scheme are being made by people aged under 35 – and where balances are available, young people are taking out big licks that could account for most, if not all, of their super.
The young are withdrawing
According to Treasury analysis, the more than 168,000 people between the ages of 21 and 25 who withdrew from their super took out a total of $975 million, or an average of $5782 each.
The 10 funds with the highest number of withdrawal applications received from the ATO have made 1.22 million payments worth a total of $8.96 billion.
The average payment from these funds was $7446.
AustralianSuper has seen the highest withdrawal levels, with members taking $1.8 billion from their funds.
Sunsuper is in second, with $1.38 billion; Hostplus, third with $1.29 billion.
The funds representing the retail (REST) and construction (Cbus) came fourth ($1.23 billion) and fifth ($764 million) respectively.
Impact on future savings
Industry Super Australia CEO Bernie Dean said although it may be necessary for some people to make early withdrawals, this should be a last resort measure as it comes at a high price.
“For every $1 a worker puts into their retirement savings, they are delivered $4 more through their investments,” Mr Dean said.
“This is the system at work for their members – so your retirement savings are 20 per cent your perspiration, and 80 per cent investment inspiration.”
The losses would be particularly marked for young people, who could fully deplete their funds and will lose time and retirement earnings by having to start from scratch once they get back to work.
This is particularly the case where super withdrawal money has been used for unnecessary consumption.
“We’ve seen up to 100,000 people drain their savings to zero. This is not a cause for celebration – it’s a tragedy waiting to happen,” Mr Dean said.
“These kids are going to have less savings later on and be more reliant on the pension – and we know that it’ll be everyone that will pay for that through higher taxes.”
“It is difficult to estimate where the final numbers will land, but we would agree with regulators that the total claims under the scheme will depend significantly on the future health and economic outlook, as this will directly affect the likelihood individuals claim,” Mr Dean said.
The New Daily is owned by Industry Super Holdings