Many withdrawing super early underestimate impact on retirement balance
More than a quarter of people who accessed superannuation under the early release scheme made their decision within a day, a survey by a major fund suggests.
And when members estimated the impact of withdrawing on their future retirement balance, only one-in-five came close to the super fund’s projections.
Nearly 2.8 million people have been approved to withdraw more than $34 billion from their retirement savings under the COVID-19 early access program.
Construction industry super fund CBUS in May and June surveyed about 3,000 members who had used the scheme, and the findings have been analysed by university researchers.
- About half of the respondents spent a week or less deciding if they would apply, including 28 per cent who decided immediately or within a day
- About a third were unsure about the impact on their retirement balances “or had not thought about that or did not care”
- 17 per cent correctly predicted the impact withdrawing would have on their super balance at retirement
“There was a fair bit of evidence in the survey responses that … people were quite confused and uncertain about the long-term impact of their withdrawal on their retirement balance,” researcher Susan Thorp from the University of Sydney Business School told 7.30.
“The impacts are quite substantial, particularly when you’re looking at long lifetimes of earnings.”
The analysis of the CBUS survey from the Centre of Excellence in Population Ageing Research said about a quarter of surveyed members withdrew almost their entire account balance.
Researchers said, “the scheme is likely to have extensive short and long-term effects on individual and aggregate retirement savings in Australia”.
CBUS has about 750,000 members and manages about $50 billion in savings. The median age of its members withdrawing super early was 39 and the median balance before withdrawal was $37,396.
‘It upsets me, to be honest’
Professor Thorp said the findings were “quite a reasonable indicator of what would be going on in the rest of the industry funds” in coronavirus-hit sectors.
She also said for people close to retirement, it is “very difficult” for them to replenish their super accounts.
“The question of impact [on balances at retirement] depends on whether people are able to replace those savings and how quickly,” she said
Melbourne single mum Justine Coleman, 57, withdrew $10,000 earlier in the year after being out of work since late 2019.
Ms Coleman said people in her generation should be “the last people that should be using super as we’re reaching towards our retirement age”.
But she had few options as her bank balance plummeted “close to ground zero”.
“It upsets me, to be honest, that so many of us were forced into dipping into our super,” she said.
“With our generation of women, when we started working, in our prime working years, most of us didn’t receive super.
“And then we ended up with lower working hours because we were caring for kids.”
‘I treated it like seed money’
South Australian Matthew Moate resigned as CEO of a wine industry association just before COVID-19 restrictions and shutdowns hit the economy.
Ineligible for the JobSeeker unemployment payment or the JobKeeper wage subsidy, he dipped into super to continue his dream of starting a business.
“Tapping into the super really gave us a lifeline,” he said. “I treated it like seed money, I guess.”
He intends to repay the $10,000 he withdrew from super back into his account over the next 12 months.
“I think super is really important,” he said.
“You do understand the compounding impacts of superannuation and what it can mean for you in years to come.”