Some Australians are misusing their early access super

Australians have collectively withdrawn more than $31 billion in superannuation since the government introduced the early access super scheme, which aimed to help people manage financial hardship caused by Covid-19.

But a new report has shown many may not be spending the cash injections – up to $10,000 accessible last financial year, with a repeat withdrawal available until December 31 – as intended, and others may not have needed the money to get by.

No criteria or proof of hardship is required to access early super release through this scheme. The research from financial data and analytic company Illion shows 38% of people who accessed the money didn’t do so in response to a drop in income. A further 21% actually got a boost to their pay packet in addition to dipping into their super.

Across both rounds of super withdrawal, a large portion have used the funds to increase spending, not simply maintain it. In the second wave, the report found 64% of this additional spend was on discretionary items like clothing, furniture, restaurant visits and alcohol.

Essential spending is still in the equation, with Illion reporting this increasing from 22% to 24% across the two rounds of early super release.

Overall, Illion has found women are more responsible spenders in this scenario, with a slightly higher proportion using it to pay off debt and cover essentials compared to men. Similarly, more men (10%) are spending this money on gambling compared to women (6%).

Who will early access to super impact the most?

Executive officer of fund management company BetaShares Alex Vynokur says the Covid-19 early super release was a “well-intentioned but misguided policy from the start.” 

“The true cost of allowing people to access their super early will ultimately be paid by future Australian governments and taxpayers,” he said.

Vynokur highlights younger Australians as the largest economic load-bearers of this policy, as they’ll be missing out on the longest periods of compounded returns on super balances. Research has shown super fund members could lose approximately $3 trillion in foregone growth by 2040.

“Not only that, younger Australians will already have to foot most of the bill of one of the largest government debts this country has ever seen,” Vynokur said.

What to do instead of accessing your super early

If you are facing hardship but want to keep your super intact for the future, there are other paths to take. First, seek out financial advice to help get your head around the situation and your options for government financial support. Check out these free financial counselling services to get started.

Beyond this, you can focus on:

• Developing a crisis budget to help get you through a shorter period of financial instability.
• Taking advantage of energy rebates and hardship offers in your state or territory.
• Making the most out of the cash you have with a high interest savings account.

Check out more savings options below.