One in four plan to tap super early: Fidelity

Australians are increasingly willing to tap super early to survive COVID but will hang on to property and shares to the last, a new survey finds.

Fidelity says those seeking financial advice are less likely to be experiencing financial stress during the COVID-19 pandemic. Picture: Getty Images

One in four Australians plans to access their super early in the next 12 months says a new survey from Fidelity Investments.

With the total amount being withdrawn from the controversial early super release scheme already exceeding the government’s estimates, the program is now in danger of becoming a key standby for all households affected by the pandemic.

Ironically, the willingness to access super contrasts with a more conservative approach to spending and investing reported across the survey, which found most Australians would cut back spending rather than sell down investments during the crisis;

Fidelity’s survey found that only 4.5 per cent of respondents would consider selling shares and just 1.8 per cent would consider selling property.

But among the same group, what Fidelity describes as a “worrying 26.1 per cent” plan to take the opportunity to access their superannuation before they retire under the special conditions of release that are now open under the scheme.

Federal treasury had estimated the scheme would see $27bn withdrawn from the super system but that total has already been reached with the scheme not due to close until September. Under the scheme Australians could take out super before they retired in two tranches: $10,000 last financial year and another $10,000 this financial year.

The irony is that anyone accessing early super will effectively be selling investments. Worse still, they will be selling tax-protected investments which were expected to compound until they retired.

A flood of new applications for early super release hit the government this week, and the numbers in the survey would indicate a willingness to use the scheme is growing in tandem with a widening awareness of its availability.

Increasing concern

Overall, the survey showed a significant increase in financial concern among Australians, especially among pre-retirees and those on casual employment arrangements.

The survey also found only half (55 per cent) of the respondents said they could last three months or less if they were suddenly made unemployed. A significant portion – 17 per cent – suggested they could not cover such a time frame at all.

“For the more fortunate, this might provide opportunities to save or spend in a more considered way. However, for many, it is causing significant worries from job security to the impact of market volatility on savings,” Fidelity Australia managing director Alva Devoy says.

“While we cannot predict how this current crisis will develop, there are steps individuals can take to mitigate the impact on their own finances, reduce their worries and improve their overall wellbeing. Taking a long-term view will be key.”

Andrew Doyle, a cross-asset specialist at Fidelity, says the survey also shows Australians are cutting back spending. The economic effect will be to dampen any prospect of a quick consumer spending recovery.

US-owned Fidelity is one of the largest investment managers in the world and a provider of financial planning services. The survey of more than 2000 people aims to highlight issues around financial advice in Australia.

This year it found that those who were managing money with financial advice were less likely to be concerned about the crisis. Almost half – 48 per cent – of all respondents not seeking advice said their mental health has suffered as a result of the crisis, compared to 34 per cent of those who were currently “advised”.