Retirement
A short-term fix: Lack of strategy behind super withdrawals
A large proportion of Australians who have withdrawn their super early as a result of financial hardship have not even stopped to consider how it will impact their savings at retirement.
A short-term fix: Lack of strategy behind super withdrawals
A large proportion of Australians who have withdrawn their super early as a result of financial hardship have not even stopped to consider how it will impact their savings at retirement.
Joint research from the ARC Centre of Excellence in Population Ageing Research (CEPAR) and super fund Cbus has discovered that the urgent short-term need for funds has driven the majority of decisions by Australians to withdraw some or all of their superannuation savings without much thought to the impact it would have on their future superannuation outcomes.
Just recently, nestegg reported that Australians have now collectively taken $33.3 billion from the superannuation savings pool since the early access to super scheme was announced by the Morrison government back in March.
To undertake the research, more than 3,000 Cbus members were surveyed who had withdrawn some or all of their superannuation savings in the first phase of the scheme, between April and June 2020.
According to the analysis, most respondents withdrew the upper limit: $10,000.
Seven in 10 respondents (70 per cent) took the $10,000 and had a balance of more than $1,000 remaining after the event.
A further 25 per cent of surveyed members “withdrew almost their entire account balance”.
“Immediate financial need” was the most common reason for accessing superannuation savings, with 59 per cent of respondents attributing this as the main factor.
Concerns for future expenditures was the second most commonly cited reason for participation in the scheme, at 27 per cent.
Around half of respondents reported spending a week or less thinking before they decided if they would apply for early release. More than a quarter (28 per cent) “either made up their minds immediately or within a day of hearing about the scheme”.
Worryingly, around one-third of respondents indicated they were “unsure of, or unconcerned about, the long-term consequences of their withdrawal”.
In addition, half of surveyed applicants said they had either underestimated, or didn’t estimate at all, the impact of the withdrawal on their superannuation balance at retirement.
According to co-author Hazel Bateman, a professor of economics at the UNSW School of Risk and Actuarial Studies, the findings demonstrate “that many withdrawers either could not or did not evaluate the impact of their decision”.
But the report was able to reveal that members who collected information from Cbus and from other sources, such as news services or social media, were half as likely to decide to withdraw within one day or less than members who used no information.
Those members who had spent longer thinking and consulted more information sources before withdrawing their savings were reported as holding more realistic expectations of impacts on retirement wealth.
“This shows that more attention to information is related to an attempt to assess impact on retirement balances,” Professor Bateman said.
RELATED ARTICLES
About the author
About the author
Superannuation
Aware Super elevates tech leadership with strategic appointment of Richard Exton
Aware Super, one of Australia's largest industry super funds, has announced a pivotal appointment to its executive team, underscoring the growing importance of technology, data, and artificial ...Read more
Superannuation
Rest appoints Marina Pasika as interim head of private markets
Rest, one of Australia's largest profit-to-member superannuation funds, has announced the appointment of Marina Pasika as the Interim Head of Private Markets. This decision comes as the fund embarks ...Read more
Superannuation
Payday Super bill introduces new challenges for SMBs, reveals Employment Hero CEO
The introduction of the Payday Super bill to the Australian Parliament has sparked a significant response from the business community, particularly among small and medium-sized businesses (SMBs)Read more
Superannuation
Rest urges Parliament to expedite payday super legislation
In a significant move towards enhancing retirement outcomes for Australian workers, Rest, one of the country's largest profit-to-member superannuation funds, has expressed strong support for the ...Read more
Superannuation
Recalibrated super performance test aims to enhance accountability and investment opportunities
In a move that signals a shift rather than a cessation, Australia's government has announced a targeted review of the superannuation performance test. This recalibration, prompted by the latest ...Read more
Superannuation
Super performance test faces a fork balancing member value productive investment and regulatory trust
APRA’s latest superannuation performance test results have reignited a high‑stakes debate: does the test optimise member value or unintentionally curb long‑term investment in housing, infrastructure ...Read more
Superannuation
Aware Super unveils innovative digital tool to boost retirees' financial confidence
Aware Super has unveiled a groundbreaking digital advice tool, Retirement Manager, designed to empower retirees by addressing their most pressing financial concerns. Developed in collaboration with ...Read more
Superannuation
APRA's super shake-up: Balancing accountability and innovation in the next round
Australia’s performance test has forced long-overdue transparency in super and accelerated consolidation. But as the regime broadens, its blunt edges are colliding with investment complexity, ESG ...Read more
Superannuation
Aware Super elevates tech leadership with strategic appointment of Richard Exton
Aware Super, one of Australia's largest industry super funds, has announced a pivotal appointment to its executive team, underscoring the growing importance of technology, data, and artificial ...Read more
Superannuation
Rest appoints Marina Pasika as interim head of private markets
Rest, one of Australia's largest profit-to-member superannuation funds, has announced the appointment of Marina Pasika as the Interim Head of Private Markets. This decision comes as the fund embarks ...Read more
Superannuation
Payday Super bill introduces new challenges for SMBs, reveals Employment Hero CEO
The introduction of the Payday Super bill to the Australian Parliament has sparked a significant response from the business community, particularly among small and medium-sized businesses (SMBs)Read more
Superannuation
Rest urges Parliament to expedite payday super legislation
In a significant move towards enhancing retirement outcomes for Australian workers, Rest, one of the country's largest profit-to-member superannuation funds, has expressed strong support for the ...Read more
Superannuation
Recalibrated super performance test aims to enhance accountability and investment opportunities
In a move that signals a shift rather than a cessation, Australia's government has announced a targeted review of the superannuation performance test. This recalibration, prompted by the latest ...Read more
Superannuation
Super performance test faces a fork balancing member value productive investment and regulatory trust
APRA’s latest superannuation performance test results have reignited a high‑stakes debate: does the test optimise member value or unintentionally curb long‑term investment in housing, infrastructure ...Read more
Superannuation
Aware Super unveils innovative digital tool to boost retirees' financial confidence
Aware Super has unveiled a groundbreaking digital advice tool, Retirement Manager, designed to empower retirees by addressing their most pressing financial concerns. Developed in collaboration with ...Read more
Superannuation
APRA's super shake-up: Balancing accountability and innovation in the next round
Australia’s performance test has forced long-overdue transparency in super and accelerated consolidation. But as the regime broadens, its blunt edges are colliding with investment complexity, ESG ...Read more
