Australians will withdraw far more from their superannuation accounts than the government first estimated, new data suggests.

Figures from the Australian Taxation Office reveal more than 2.5 million Australians had withdrawn $27 billion from their superannuation accounts as of July 5.

That’s on par with the federal government’s initial estimate – which had 1.5 million people withdrawing $27 billion from March to September – but the scheme has more than three months to run.

Industry Super Australia (ISA) CEO Bernie Dean said his group had long held concerns that the scheme would unnecessarily erode the retirement balances of workers and young Australians in particular.

“Unfortunately, 1 million more people than the government estimated have accessed the government’s early release of super scheme,” Mr Dean said.

When the scheme was announced, ISA said total withdrawals were likely to reach $35 to $40 billion – far higher than the government’s initial estimate.

And those figures seem likely to be reached, given withdrawals did not decelerate during the first half of the scheme.

In fact, APRA said this week that “high volumes of applications are expected for the start of the second tranche of the COVID-19 Early Release Scheme in early July”.

Dramatic new figures produced by consultants KPMG show that 35 per cent of super fund members under 40 have or plan to make super withdrawals, compared to only 10 per cent of members aged between 40 and 64.

Source: KPMG

A 30-year-old withdrawing the maximum amount of $20,000 would have  $49,823 less at retirement, according to Super Consumers Australia, while a 40-year-old would have $39,904 less.

“That so many young Australians have accessed their super savings in the middle of their working life is a tragedy waiting to happen,” Mr Dean said.

KPMG also found that members whose employment had been affected by the pandemic were more likely to have considered switching funds.

A quarter (25 per cent) of affected members were considering switching funds, compared to 12 per cent of all those surveyed.

Retail fund members shaken

It seems the pandemic has affected members of retail funds more than industry fund members.

KPMG found that 23 per cent of retail fund members said they were likely to switch funds in the next 12 months, compared to only 9 per cent of industry funds.

But while fewer industry fund members are considering switching funds, they have dominated early withdrawals.

According to the Association of Superannuation Funds of Australia (ASFA), roughly 65 per cent of early release payments have been made by industry funds, 29 per cent by retail funds, 5 per cent by public-sector funds, and only 1 per cent by corporate funds.

Industry funds have the highest levels of withdrawals because they cover the vast majority of workers in hard-hit industries such as hospitality, retail and transport.

Public-sector fund withdrawals are low because public-sector workers mostly enjoy secure, permanent employment, while the figure for corporate fund members is low because there are few funds left in that sector.

Figures for withdrawals from self-managed super funds were not available but it is believed that the figure is very low. That’s because over half their membership is retired and already making withdrawals, while the vast majority of working members are over 40 and have large balances.

Poor design

Labor’s Shadow Financial Services Minister Stephen Jones said: “The Liberals’ robo-release early access scheme is part of ongoing Coalition attempts to undermine universal super. It has been poorly designed and implemented, riddled with fraud and abuse.”

Although Labor supports people accessing their super when they’re in genuine hardship, Mr Jones said “it’s alarming that so many Australians have been forced to raid their retirement savings, rather than receiving timely government support”.

“It’ll take a long time to repair the $27 billion hole the Liberals have torn in Australian’s retirement savings,” Mr Jones said.