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Allowing Early Access to Retirement Savings: Lessons from Australia
By Nathan Wang-Ly & Ben Rhodri Newell
In response to the COVID-19 pandemic, many governments around the world introduced policies aiming to provide citizens with financial relief through early access to their retirement savings. In Australia, the Early Release of Super (ERS) scheme allowed eligible citizens to withdraw up to A$20,000 in funds between April and December 2020. Using data provided by a large Australian bank, we examine the characteristics of the individuals who withdrew, how they used the withdrawn funds, and what impact this had on their financial wellbeing. We find that, for the most part, the scheme achieved its intended goal; it was accessed by individuals in poorer financial circumstances and helped them to pay down high-interest debts and avoid arrears. However, our results also suggest that some individuals may have used their withdrawn funds on discretionary purchases, contrary to the scheme’s intended purpose. Based on our findings, we consider the implications for governments looking to implement similar policies in the future, as well as the opportunities to support individuals who have already withdrawn from their retirement savings.
Source: SSRN
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