Early superannuation withdrawals slowing: APRA

Australians are turning off the superannuation tap, with withdrawals under the early release scheme hitting a new low for the fourth week running.

Australians are pulling less money out of superannuation early. Picture: Cathy Adams.

Australians have all but turned off the superannuation withdrawal tap, with the government’s COVID-19 early release of super scheme’s weekly amount paid out to fund members reaching a new low for its fourth consecutive week.

The scheme allows Australians who have seen their income reduced due to the impact of the pandemic withdraw up to $20,000 from their retirement savings in two tranches: one this financial year and one last financial year.

From the outset in late April, money was withdrawn enthusiastically at a rate of several billion dollars a week – but that amount began to slow in August.

Data released by the Australian Prudential Regulatory Authority on Monday shows that in the week to September 6 just $360m was paid out, bringing the total amount of superannuation withdrawn prematurely to $33bn by 4.3m fund members.

The average payment made to fund members over the scheme’s lifetime is $7678, with Australians who chose to double dip and use both tranches seeking, on average, $8426.

The scheme, originally anticipated to end next week, has been extended by the government to conclude on December 31.

Treasury estimates that by the end of the year, Australians will have withdrawn around $42bn from their super to the chagrin of super funds.

Speaking to the House standing committee on economics last Friday, industry fund Hostplus CEO David Elia said that although he supported the scheme, 38,000 Hostplus members had completely emptied their accounts, many in lower socio-economic areas.

Mr Elia also said ongoing dialogue around extending the ways Australians could use their super early as well as debates over whether to proceed with the legislated raise in the super guarantee were creating uncertainty for a sector that requires it for large-scale investment of the kind that could assist Australia’s economic recovery.

HSBC Australia and New Zealand chief economist Paul Bloxham told The Australian that although the early release of super scheme had been beneficial, businesses and super funds needed superannuation policy certainty to assist the post-COVID recovery.

“The early release scheme for super has been a useful contributor for supporting the economy in the face of the single largest economic shock we have seen since the 1930s,” Mr Bloxham said.

“But as the economy starts to pick up, there will be less need for people to withdraw from their super, and we would expect those withdrawals to start to slow down.

“It’s becoming very clear that we need a road map for the economy going post COVID-19 and we’re looking to the budget in October and hoping that it will contain a detailed pathway for the economy across a lot of directions – clarity around the direction for superannuation is important.”

Fund-level data shows that Hostplus has paid just under $2.8bn in superannuation to 387,000 members in total – the fourth most of any fund.

Australian Super leads the way in total withdrawals, paying out more than $4.46bn to 581,000 fund members.

Overall, the 10 funds with who received the highest number of applications have made 2.8 million payments worth a total of $21.7bn.