Who dipped the most into the COVID-19 ERS program, and why?
COVID-19 Early Release of Super. As the ERS program moves into extra time, we revisit our projections on the final score. The program has supported many Australians that have experienced financial hardship, and many that haven’t. nuj looks at the impacts to the super funds, the cohorts that accessed their super early and how the money was spent.
The second half of the COVID-19 Early Release of Super (ERS) program is now complete, but with the government extending the program to the end of December, it has effectively moved into extra time. In this review of the ERS program, we look forward and give our views on where we think the scoreboard will land at full time.
The program has revealed some interesting spending behaviours across the applicant base, especially those that have dipped twice into their retirement savings. Analysing demographic data across the super funds most exposed to the program has highlighted concerning participation behaviours for particular cohorts.
nuj continues to augment the weekly data distributed by the regulator with other data sources. We dive deeper into the machinations of the program in order to discover insights that are worth sharing. If the ERS program interests you as much as it interests us, you will enjoy our insights.
Round two behavioural review
The spike in applications in the early weeks of the second round of the ERS program correlated with a spike in discretionary spending over the same period.
As round two of the ERS Program kicked off, we saw some very different behaviours in comparison to the prior round. A mad rush on the ATO MyGov site on the first day of the new financial year resulted in the application system crashing. This smash and grab mentality only lasted for the first few weeks of the round, and begs the question: why did these members so desperately need the money?
Illion AlphaBeta consumer spending data over the ERS program to date shows a steep spike in the discretionary spending during the early weeks of the second round. All spending increased over this period, however, discretionary spending overtook essential spending for the first time since the crisis started.
Source: illion & AlphaBeta
Drilling down deeper into spending by category over the early spike period of round two, there are notable changes in spending for online gambling, furniture, pet care, home improvement and department stores. Correlating these discretionary spending changes with the surge in the early release of super withdrawals poses the question: were all members accessing the ERS program truly experiencing financial hardship?
It raises the fundamental question of whether entry to the ERS program was too broad? The early spike in second round applications revealed a large proportion of repeat members clipping the ticket a second time. Although early access to super may have driven increased economic activity with a spike in overall spend, we can only assume that the government hadn’t intended on Australians dipping into their retirement savings to buy a new TV!
Our cohort review of the program
Our cohort analysis suggests that women are over-represented in those funds impacted most by the ERS program.
Using gender and demographic distributions across the industry, we compared the gender and age distribution of members of the top 20 impacted funds (adjusted for size) against the overall distribution.
While on the surface it appears the ERS program has had a broad effect across Australians, when we examine the underlying participating members we see a bias towards women in the base. Without drawing any parallels between the change in consumer spending habits and the cohort that has dipped the deepest into their retirement savings, it is clear from our cohort analysis that women are disproportionally present in the top affected funds.
Our analysis indicates that women aged between 35-49 are the cohort that has been most exposed to an early release of superannuation. Considering that women are already disadvantaged in super, was the early release of super the best program to support these women through the crisis and what support do they need to get their retirement savings back on track?
The final score
nuj has revised its recent forecast to $40bn in light of the extension of the ERS program to 31st December, with a projected 5.2mn members accessing the program and 46% double-dipping.
Following the initial spike in applications in the early weeks of round two, we are seeing the log curve start to flatten with interest in the program tapering off. Extensions to other government support programs along with analysis of the ERS impacts of the Victorian outbreak, all indicate that there are unlikely to be any further spikes in the current program.
Trending out both initial and repeat applications have a nuj forecast of around $40bn in total payments made, representing 2.1% of the total APRA regulated super fund assets. Repeat applications comprise of just over a third of total forecast payments and reflect a double-dip ratio of 46%.
The concentrated impact of the program has been consistent from the beginning, evident in our forecasts with the top five funds having projected payments of $15.2B and accounting for 38% of forecast total applications. Given the size of these funds, the average impact on their assets has been relatively low, with only 4.7% removed, however, brand awareness for these funds would be at an all-time high. This leaves us with this final thought: was this just a really expensive awareness campaign?
