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Monday, August 2 • 10:45am - 12:15pm
1C3 Determinants of Early-Access to Retirement Savings: Lessons from the COVID-19 Pandemic

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Junhao Liu, The University of Sydney; Isabella Dobrescu, UNSW Sydney; Ben Newell, UNSW Sydney; Susan Thorp, The University of Sydney; Hazel Bateman, CEPAR, UNSW, Sydney

Using data from a large Australian pension fund and the backdrop of the COVID-19 pandemic, we examine what drives peoples’ decisions to make early withdrawals of their retirement savings in financial hardship situations. The Australian COVID-19 Early Release Scheme allowed people immediate access to up to $A20,000 of their ‘preserved’ retirement savings in two rounds via a government website and without verification. We find that while the majority of survey respondents withdrew money for immediate consumption needs, a substantial proportion of them were concerned about future needs. Most withdrawers thought about the decision for less than a week, many appeared to use the $A10,000 per round limit as an anchor in choosing their withdrawal amount, and around 1/3 of respondents were either unsure or did not care about the long-term impact of their withdrawal. Conditional on eligibility, the probability of withdrawal was significantly higher where respondents (I) were more concerned about future needs, (ii) did not think about the long-term impact, and (iii) under-estimated or didn’t estimate at all the fall in their retirement savings. Our results suggest that many people who withdrew under the scheme did not fully understand the consequences of their choice and prompt the question as to whether the framing of ‘mandatory’ retirement savings as a means to finance retirement has been irrevocably damaged.


Junying Zhao

University of Oklahoma Health Sciences Center

avatar for Junhao Liu

Junhao Liu

Postdoctoral Research Associate, The University of Sydney

Monday August 2, 2021 10:45am - 12:15pm EDT

Attendees (9)