Move that cost Aussies $120k
MORE than 2.6 million Australians withdrew a combined $38bn from their superannuation accounts during the Covid-19 pandemic.
Now, new analysis has revealed that those who took the maximum amount available to them under the scheme – $20,000 over two tranches – cost their future retirement income $120,000 in today’s terms.
Lower income Australians were more likely to access their super early, using the money to gamble, buy takeaway meals and groceries after then prime minister Scott Morrison and former treasurer Josh Frydenberg allowed people to withdraw money from their accounts during the early days of the pandemic.
The policy was announced in March 2020 and was initially set to allow 1.5 million Australians to withdraw up to $10,000 from their super before June 30 and another $10,000 from July 1. That nearly doubled to 2.6 million people.
The scheme was available to people who were eligible to receive JobSeeker, had been made redundant, had their work hours cut by at least 20 per cent, or were a sole trader who had shut their business or suffered a 20 per cent decline in turnover.
A report released by George Washington University’s Steven Hamilton, Harvard’s Geoffrey Liu, and Australian National University’s Tristram Sainsbury found that despite a downturn in cash use elsewhere, users of the scheme on average withdraw $1000 more than normal out of the ATM.
On average, the scheme’s users increased their gambling spend by $293.
People who withdrew money out of their super were more likely to spend the money on short-term means.
“Our findings … suggest roughly 80 per cent of with-drawers were present-biased,” the report states.
“In selecting strongly on the present-biased, the program presents a sharp tradeoff between effective macroeconomic stimulus and suboptimal retirement saving policy.”
The analysis, which used anonymised ATO and Social Security Department data, reveals that 40 per cent of the users – 71,720 people – worked in construction or mining.
The report’s release comes as Treasurer Jim Chalmers works towards legislating a purpose of superannuation to ensure that all policy and budget decisions made surrounding super are measured against ensuring it does not harm a person’s retirement prospects.
Teachers were the least likely to access their super.
Of those who accessed the scheme, five in six withdrew as much as they could, 75 per cent of whom took out the maximum $10,000 available to them.
Three-quarters took the maximum in both rounds.
A quarter of people dipped into their superannuation within three days of the scheme becoming available.
The report suggests 18 per cent of those who did withdraw from the scheme were ineligible.