20K Now or 50K Later? What’s Driving People’s Decision to Withdraw their Super?

Hazel Bateman, Robbie Campo, David Constable, Isabella Dobrescu, Ailsa Goodwin, Junhao Liu, Ben R Newell and Susan Thorp

By mid-August 2020, Australian superannuation fund members had made more than 3 million applications to withdraw retirement savings under the COVID-19 Superannuation Early Release Scheme, supporting more than $31B in payments. The relaxation of conditions for early release of superannuation savings changed a fundamental feature of the Australian retirement savings system. Responses of members to the early release scheme highlight the effectiveness of the standard superannuation preservation rules. Early withdrawals have short-term and long-term consequences for individual members who take payments under the scheme, and for society as a whole.
We report results of a survey of over 3,000 members of Cbus, a leading industry fund, who withdrew some or all of their superannuation savings in the first phase of the COVID-19 early release scheme between April and June 2020.

Major findings include:

• Surveyed COVID-19 early release scheme applicants expressed urgent short-term need for funds and considerable uncertainty about the long-term consequences of their decision.
• The $10,000 limit both guided and constrained withdrawal amounts.
• Around 25% of surveyed members withdrew almost their entire account balance.
• Immediate financial need (59%) and concerns for future expenditures (27%) were the main reasons members gave for accessing savings. Those who had not experienced reduced working hours were more likely to withdraw for future concerns or to protect their savings.
• Around 30% of surveyed applicants were unsure of, or unconcerned about, the long-term consequences of their withdrawal.
• Around 50% of surveyed applicants either underestimated, or didn’t estimate, the impact of the withdrawal on their superannuation balance at retirement.
• 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 sources.
• Members who spent longer thinking and consulted more information sources before withdrawing their savings held more realistic expectations of impacts on retirement wealth.