Originally published at LinkedIn Pulse.
One of the Australian Government’s responses to COVID-19 has been to allow Australians to withdraw money from their superannuation (aka retirement savings) accounts. This early release scheme was designed to help people suffering financial hardship because of the economic crisis unleashed by the pandemic.
Every week, the Australian Prudential Regulation Authority (APRA) publishes data on the scheme, at both the individual fund level and in aggregate for all funds with more than four members. This excludes Self Managed Superannuation Funds (SMSFs).
By the end of last week, 31 May 2020, nearly two million Australians have requested payment under the scheme. The amount paid last week was $1.3 billion taking the total since the scheme commenced to $13.5 billion.
Chart 1: Cumulative COVID-19 Early Release Scheme statistics from APRA
What about round two?
Workers can access up to $20,000 from their super in two separate rounds. Applications under the first round can be made up to 30 June 2020 for a maximum of $10,000. A further $10,000 can be applied for in the second round, between 1 July 2020 and 24 September 2020.
The average of all early release applications paid up to the end of last week, 31 May 2020, was $7,473. This is well below the maximum of $10,000 and suggests that many Australians with small balances are emptying their superannuation accounts. This is also backed-up by talking to fund staff.
It will be interesting to see the Round 2 data.
Is there any difference by segment?
There sure is. Overall, there have been 1.8 million applications under the scheme. This means that 7% of all account holders made an application. The amount paid represents only 0.7% of the total assets under management for these funds.
It is important to remember that the superannuation industry has five distinct segments. Table 1 shows the data for four of these segments – SMSF data is not included in the APRA reports. Clearly, the industry superannuation funds are feeling the biggest impact of the early release scheme.
Table 1: Early release by segment as at 31 May 2020
Which funds have had the biggest impact?
There is a wide range of impacts by fund. The top five funds by the number of applications received have paid out a total of $6.5 billion, which is nearly 50% of the total paid despite these funds comprising just over 20% of the total assets for all funds. Table 2 lists these funds and the proportion of accounts and assets involved in the early release scheme.
Table 2: Top five funds as at 31 May 2020
There are two industry funds with a greater proportion of applications paid as a proportion of the number of accounts than HOSTPLUS. These are both meat industry funds: Australian Meat Industry Superannuation Trust (AMIST) and Meat Industry Employees Superannuation Fund (MIESF). Yes, many readers will be surprised to learn that the meat industry has not one but two superannuation funds. What’s so special about the meat industry that it needs two funds? Who knows, but what we do know is that, in aggregate, these two funds have received applications from 20% of their account holders and have paid out about 3% of total funds under management.
The three funds with the greatest proportion of accounts making claims are all funds run by the trustee company Sargon: Tidswell Master Superannuation Plan (applications received for 26% of accounts), Grosvenor Pirie Master Fund (20%), and the DIY Master Plan (19%). You may not know these names as they are not retail brands. They are funds used by promoters of some of the newer superannuation brands in the market including Spaceship Super, mobiSuper, Raiz Super and Simple Choice Super.
The average payment from these three funds is only $5,408. This is lower than the overall average and a long way from the $10,000 maximum. It is likely that their members with small account balances are withdrawing all their money from these funds.
It is certainly worth keeping an eye on APRA’s weekly report of the early release scheme. It will be interesting to see what happens once we are in the new financial year. Will members make a second application? Will we see another wave of new applications? How many Australians will need to restart their retirement savings from scratch?
The two other APRA statistical reports that will be revealing are the quarterly report for the June quarter and the fund level report for 2020. Stay tuned for further analysis.
All data sourced from various APRA reports.