Young Australians accounted for the lion’s share of applications to the early super access scheme, according to the nation’s financial regulator.
Those aged between 20 and 30 accounted for 61 per cent of all COVID emergency withdrawals and 31 per cent of young people who accessed the scheme completely emptied their accounts.
Final figures released by the Australian Prudential Regulation Authority (APRA) show that between April 20, 2020 and January 1, 2021, 3.46 million Australians withdrew $36.4 billion from their super, receiving an average payment of $7638.
Those who made two withdrawals took out more than the average, with a mean withdrawal of $8268 in their second tranche.
Younger Australians between 20 and 30 withdrew $12.2 billion for an average payment of $6027.
The total number withdrawing in that age group was 1.25 million, a massive 61 per cent of the overall withdrawal numbers of 2.05 million.
Of the younger people making withdrawals, 450,780, or 31 per cent, withdrew their total balance.
For older cohorts, who are likely to have had more in super, only 8 per cent of the 2.35 million accessing the scheme cleaned out their fund completely.
Younger people cleaning out their funds face a hard task making up the money over the remainder of their working lives.
The government’s Retirement Income Review found that the average 30-year-old who withdrew from their funds the maximum allowable amount of $20,000 will retire with $40,300 less in their account than would otherwise have been the case.
Industry Super Australia CEO Bernie Dean said the withdrawals highlighted the need for the superannuation guarantee to move from 9.5 per cent to 12 per cent of wages as legislated to help people rebuild balances.
“The Australians who made the difficult decision to sacrifice their retirement savings to support themselves during a pandemic did so knowing the Prime Minister had pledged to lift the super rate so they could make back what they have lost,” Mr Dean said.
“It is vital the super rate goes up to 12 per cent to help them make back what they have lost.
“It would be a cruel blow to these workers if a group of backbench MPs, [who have been agitating for SG rises to be scrapped] who all pocket 15 per cent, got their way and the government cut super.”
Super double whammy
“Busting into super early comes at a steep cost for the individual and future taxpayers. As a society, we shouldn’t be demanding our young people pay the price yet again,” Mr Dean said.
The effects of early withdrawal on young super balances may be contributing to a fall in consumer confidence for people under 25 at a time when it is rising for the rest of the community.
The Westpac-Melbourne Institute Consumer Sentiment Index is now 14.2 per cent above its pre-pandemic level in February 2020.
However, although consumer sentiment rose across the board, for those between 18 and 24 it fell by 2.3 per cent compared to February 2020.
Super withdrawals under COVID dwarfed the usual super withdrawals for compassionate reasons, which totalled $513.5 million last financial year.
That money was received by 59,000 people who had to pass a rigorous test for eligibility.
“The scheme was characterised by high levels of applications after the opening dates of each application period (April 20, 2020 and July 1, 2020) with volumes tailing off in the later weeks of these application periods, particularly the second application period,” APRA said of the emergency pandemic measure.
Overall, payments were dominated by the 10 largest super funds, which paid out a staggering $23.9 billion out of the $36.4 billion in withdrawals.
Industry funds paid out the most claims, with six of the top 10 falling into that category.
AustralianSuper, the nation’s largest super fund with $191 billion in funds under management, saw the most withdrawals, at $5.02 billion.
The largest withdrawal from a retail fund was $1.69 billion from Westpac-owned BT.
The New Daily is owned by Industry Super Holdings