Pandemic-era early super release scheme ineffective: e61 analysis

The Morrison government’s pandemic-era policy to grant cash-strapped workers early access to their superannuation did little to improve the wellbeing or financial stress experienced by those who withdrew from their savings, new research suggests.

The fresh research comes as Coalition backbenchers call for additional flexibility to enable early access to their superannuation savings.

The Morrison government’s pandemic-era policy to grant cash-strapped workers early access to their superannuation did little to improve the wellbeing or financial stress experienced by those who withdrew savings, new research suggests.

Conducted by independent think tank e61 Institute, the analysis of the scheme – which enabled workers facing financial hardship to withdraw up to $20,000 from their superannuation savings – comes as Peter Dutton faces calls from within the Coalition to provide more flexibility to allow for the raiding of retirement nest eggs.

Introduced as an emergency measure in April 2020, it is estimated three million Australians took advantage of the early access scheme, withdrawing a cumulative $38bn from super accounts.

To be eligible, individuals had to either lose their job or experience a reduction in their working hours of at least 20 per cent, with the early access designed to cover immediate, and often larger, financial needs, such as rent, bills, and debt repayments.

Yet research by e61’s Pelin Akyol and Gianni La Cava found the wellbeing of people who accessed their superannuation early “barely changed”, while financial stress – which temporarily spiked during Covid – simply returned to its pre-pandemic average.

“The apparently limited impact of (early superannuation release) on financial stress may be because the money was used for purposes other than managing household cash flow,” they wrote. “Instead, they may have chosen to spend the money elsewhere or invested it in alternative assets.”

By contrast, recipients of the JobKeeper payment, who from April to September 2020 received an additional $550 per fortnight – nearly double the previous rate of the welfare payment – “provided fast and effective financial relief and raised life satisfaction”, the researchers found.

The Australian Taxation Office already permits the early release of superannuation in a small number of specific circumstances, including access on compassionate grounds or due to a terminal medical condition.

But backbench MPs are pressing shadow cabinet to broaden the criteria under which early access would be permitted and make it easier for workers to access their retirement savings in the event they are experiencing financial hardship.

The Coalition leadership, however, has shown little appetite to make changes to the superannuation system beyond its previously announced plan to permit first-home buyers to draw down as much as $50,000 from their retirement savings for a house deposit.

Under the proposal, first-home buyers would later have to repay the withdrawn amount, plus a share of the capital gain made on the property, when they sell the house.