Around $18 billion is expected to be paid out this financial year (2020/21) to those who have accessed the early access to superannuation scheme, according to the Association of Superannuation Funds of Australia (ASFA).
A report into the experience to date with the early release of superannuation scheme was released by ASFA today, Tuesday 30 June. It estimated that about 2.5 million Australians, which equates to nearly 19% of the labour force, are likely to access the early release before 30 June, which would equate to total payments of around $18 billion.
The average payment made over the period since inception is $7,486, with the majority of applications (52%) made by persons aged under 35.
The report suggests the “greater incidence of applications by the young most likely reflects the fact that many younger people are employed in industries particularly affected by the downturn in employment, such as retail and hospitality. They are also less likely than older age groups to have other forms of accessible savings”.
Low incidence of early release applications in ACT
Locally, the ACT is reported to have a low incidence of early release applications, “reflecting the high level of public sector employment in that Territory with fewer reductions in jobs or hours worked”.
Despite almost 2.5 million Australians accessing the early release, ASFA said there could be nearly as many again requesting a new or additional early release of superannuation after 1 July 2020.
However, there are concerns about the erosion of retirement balances.
According to the report, the ASFA survey data indicated that around 25% of applicants had a balance under $6,000 after taking money out through early release; around 40% had under $10,000; and 5%-10% had a nil or very low balance.
“This has implications for the amount available for any further release after 1 July and for the eventual retirement savings of the individuals concerned.”
Yet without superannuation, ASFA CEO Dr Martin Fahy said “the great bulk of Australian workers would not have had any significant financial assets to draw upon in this time of economic diversity”.
Figures suggest less than 5% of Australian wage and salary earners receive rent from an investment property; under 10% have dividends from shares over $200 a year; and about 25% of households have less than $1,000 in cash savings.
Dr Fahy said this illustrates the importance of compulsory superannuation for individuals and the broader economy.
“The erosion of retirement balances through the early release scheme reinforces the need to move as soon as possible to a Superannuation Guarantee rate of 12% in order to provide adequate retirement savings for individuals, particularly women and younger Australians.”