Urgent short-term needs for funds are driving early release of super withdrawals with around 25% of surveyed members withdrawing almost their entire balance and most doing so at the $10,000 limit, according to a study.
According to research from the ARC Centre of Excellence in Population Ageing Research (CEPAR) and industry super fund Cbus, the $10,000 limit had both guided and constrained withdrawal amounts with most withdrawing at the limit.
The study surveyed 3,000 Cbus members who withdrew some or all of their superannuation savings in the first phase of the COVID-19 super early release scheme between April and June.
Immediate financial need (59%) and concerns for future expenditures (27%) were the main reasons cited for accessing the funds.
Co-author of the study, Susan Thorp, professor of economics at the University of Sydney Business School, said those surveyed expressed they were uncertain about the long-term consequences of their decisions.
“Around one third of respondents said they were unsure about the impact of their withdrawal on their retirement balances, or had not thought about that, or did not care,” Thorp said.
Hazel Bateman, co-author and professor of economics at the UNSW School of Risk and Actuarial Studies, said they also compared respondents’ estimates of the impact of their withdrawal with a projection of that impact based on assumptions made in a Cbus guidance on the early release scheme for members.
“Around half of the survey respondents either underestimated or didn’t estimate the impact of the withdrawal on their superannuation balance at retirement,” Bateman said.
“These findings demonstrate that many withdrawers either could not or did not evaluate the impact of their decision.
“However, another finding is that those who spent longer thinking about their decision and consulted more information sources before withdrawing their savings, held more realistic expectations of the impacts on retirement wealth and were half as likely to decide to withdraw within one day or less than members who used no information sources.
“This shows that more attention to information is related to an attempt to assess impact on retirement balances.”