Super funds received more than 340,000 applications in three days from people who wanted to make a second withdrawal from their superannuation accounts under rules allowing early access to retirement savings due to the coronavirus crisis.
The double drawdowns have increased concerns that people who are desperate for cash due to the recession provoked by Covid-19 lockdowns are draining their entire retirement savings.
Statistics released by the prudential regulator on Tuesday show that applications to crack open super accounts surged as the new financial year ticked over at the start of the month.
Under the emergency drawdown rules, introduced by the treasurer, Josh Frydenberg, in March, people suffering hardship due to the coronavirus crisis were allowed to draw down up to $10,000 before the end of the financial year and another $10,000 after 30 June.
The Australian Prudential Regulation Authority said that in the week of 29 June to 3 July, which includes three days of the new financial year, there were 511,000 applications for early release, up from 127,000 the previous week.
Of these, 346,000 were applications to draw down on the same account for a second time. The average amount sought in repeat applications was $8,904, indicating many people have withdrawn as much as possible.
Apra said super funds have paid out $19.1bn.
Industry Super Australia, which represents the employer-and-controlled industry super fund sector, said Apra’s data showed total drawdowns were likely to eclipse the total of $29bn estimated by the government by the time the scheme closes on 24 September.
“The higher amount of average withdrawals on repeat applications may indicate people are taking the maximum available to them, be that what they have in their balance or the full $10,000 available under the scheme,” Industry Super Australia’s chief executive, Bernie Dean, said.
“ISA analysis has shown that almost 500,000 people have already wiped out their super savings, for those people it may be very difficult to make up those contributions [and] their retirement savings would be further eroded if a group of Coalition backbenchers get their way and the legislated super increase is scrapped.”
The lobby group estimates people under 40 are twice as likely as older Australians to use the early access provisions and fund bosses worry any new drawdown schemes will sap the sector’s ability to invest in nation-building infrastructure.
“That so many young Australians have accessed their super savings in the middle of their working life is a tragedy waiting to happen, because it comes at a steep price to your retirement nest egg – with the lost interest often three or four times the amount you take out,” Dean said.
The drawdown data was released as new figures showed that employment has not recovered from the pandemic.
Payroll data released on Tuesday showed employment was still down by more than 5% by the end of June, compared to pre-coronavirus levels.
About 35% of jobs lost in April were regained, the ABS said.
Dean said the mammoth super drawdowns showed the government should stick to its current policy of increasing employer contributions by 0.5 percentage points a year until they reach 12% in 2025.
The increase is currently law but is under heavy attack from industry groups and government backbenchers who argue it is unaffordable.