Australians who withdrew $20,000 from their superannuation last year have already foregone as much as $3,164 in investment growth, a new report has found.
More than 3 million people withdrew money from their superannuation during the COVID-19 downturn, amid warnings that doing so could negatively affect future performance.
Research released on Tuesday by the McKell Institute found that super fund indexes have increased in value by between 15 and 20 per cent since hitting a low point in 2020.
That means that the $36.4 billion withdrawn from super would have grown to $41.1 billion if left in the accounts. That makes up $4.7 billion in foregone retirement savings, or $3,644 per person.
“Any Australian who took part in the early access of super scheme has foregone any potential capitalisation on this market recovery for the amount that they withdrew,” McKell Institute CEO and policy officers Michael Buckland, Edward Cavanough and Connor Wherrett said.
“According to ABS figures, the average withdrawals were $7,728 and $7,536. McKell Institute estimates calculate that if an individual withdrew these figures at their first opportunity, they have foregone $2,420 in returns from market growth.”
They said the Government should have offered more targeted support to those in need, rather than offering the option to withdraw from their super.
Most of the money withdrawn from superannuation was funnelled into mortgage or rent repayments, followed by households bills and debt.
The researchers said these figures are problematic as Australians shouldn’t have needed to access their superannuation to cover those bills, and instead the Government should have installed a stronger social safety net.
“Even if this would have required a higher amount of Government debt, the Government currently has the ability to borrow money for effectively little to no interest. As such, it would be far more equitable for the government to have withdrawn.”
The other option would have been for the Government to require banks, landlords, utility companies and financial services to offer deferred payment schemes to all customers.
“More should have been done to avoid the necessity of Australians withdrawing from their super. Even if Australians were able to take out a loan in 2020 with an (astronomical) interest rate of 10 per cent, this would have resulted in less foregone personal wealth than the early access to super scheme.”