Aussies pay the price for early release of super

The government's COVID-19 early release of superannuation (ERS) scheme saw the closure or near emptying of almost one million member accounts, largely held by women, single parents and the unemployed.

A new analysis by the Association of Superannuation Funds of Australia illustrates the impact of the ERS scheme on super funds and the members that took advantage of it.

In total, about three million Australians applied to access their superannuation with many of them doing so twice. Of these, close to one million closed or almost cleaned out their accounts.

Of those that withdrew all their super, the vast majority were women, single parents and the unemployed, ASFA says.

The association's analysis shows that a 30-year-old who withdrew $20,000 in 2020 will now retire with about $43,000 less, assuming no catchup contributions are made and they retire at age 67.

"While superannuation was able to do much of the heavy lifting by distributing payments to people quickly in the early days of the COVID-19 pandemic, it's important that we recognise the detrimental impact that this has had for the retirement savings of millions of Australians," says ASFA deputy chief executive Glenn McCrea.

He also used the data as an opportunity to once again push for a legislated objective of superannuation.

"It's more important than ever that we legislate the objective of super to ensure that Australians' savings are preserved to support a dignified lifestyle in retirement," he says.

On the super fund front, ASFA says super funds coped well with the scheme, particularly given they had never undertaken anything similar.

Funds made $38 billion in payments at a time when financial markets were markedly stressed, and were able to process 4.9 million applications for payments while fund and administrator staff were impacted by lockdowns.

Finally, ASFA says the data shows instances of fraud were relatively uncommon and no fund members were left out of pocket due to third-party fraud.

This article first appeared on Financial Standard

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