The Early Release Superannuation (ERS) scheme emptied nearly one million superannuation accounts, mainly belonging to women, single parents and the unemployed.
The ERS scheme ran from 20 April 2020 until31 December 2020 and was part of the Morrison Government’s Coronavirus Economic Response Package Omnibus Bill 2020.The scheme was open to those who had lost work due to the COVID-19pandemic or who were entitled to receive government benefits. Those eligible could access up to $10,000 of their super during the 2019–20 financial year and up to $10,000 between 1 July 2020 and 31 December 2020.
Over the course of the scheme, superannuation funds paid out $38 billion.
New research from the Association of Superannuation Funds of Australia(ASFA) found that those who withdrew funds under the ERS have paid a price, both in terms of lost retirement savings but also from removing their funds when financial markets were down.
The analysis shows that a 30-year-old who withdrew $20,000 from their superannuation fund under the ERS scheme would have $43,000 less in retirement savings at 67 years of age. These calculations don’t take into account the fact the funds were withdrawn at a low point in the market.
“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,” Glen McCrea (pictured), ASFA Deputy CEO, said,
“Young people, women, single parents and the unemployed paid a high price in terms of the cost to their retirement savings.”
More than 3 million Australian applied for ERS funds, some making two applications, a significant number considering there are only around 14 million in the workforce, including the unemployed. In total, nearly 5 million applications for funds were received. Around 7% of applications were made by non-residents.
Nearly 1 million Australians closed or nearly emptied their superannuation accounts –a move more prevalent among women, single parents and the unemployed. As a result, there was an increase in the number of women on low incomes, single parents and the unemployed who have no superannuation accounts.
The ASFA analysis shows that while most of the money taken out of super was spent on paying the mortgage, rent and household bills, some was also spent on clothing, furniture, dining out in restaurants, gambling and alcohol. While there were concerns the scheme could give rise to fraudulent transactions, analysis by APRA found there were only 1,703 fraud events of 4.5 million payments, only 0.04%.
No tax was paid on the withdrawn funds.
