Determinants of Early-Access to Retirement Savings: Lessons from the COVID-19 Pandemic

62 Pages Posted: 31 May 2022

See all articles by Hazel Bateman

Hazel Bateman

UNSW Sydney, CEPAR

Loretti Dobrescu

UNSW Australia Business School, School of Economics

Junhao Liu

The Vanguard Group, Inc.

Ben Rhodri Newell

Independent

Susan Thorp

The University of Sydney Business School

Multiple version iconThere are 2 versions of this paper

Date Written: May 27, 2022

Abstract

The COVID-19 Early Release Scheme allowed Australian retirement plan participants in financial hardship immediate access to up to $A20,000 of their ‘preserved’ retirement savings, making otherwise illiquid balances temporarily liquid. Using administrative and survey data from a large Australian retirement plan, we examine what drove people’s decisions to withdraw. We find that while the majority of surveyed participants withdrew money for immediate concerns, a substantial proportion were motivated by future needs. Most withdrawers thought about the decision for less than a week and appeared to use the $A10,000 per round limit as an anchor in choosing their withdrawal amount, and many people who withdrew under the scheme did not fully understand the consequences of their choice. As well as offering insights into preferences for liquidity, findings raise the question of whether the framing of mandatory retirement savings as a mental account solely to finance retirement has been irrevocably altered..

Keywords: pension early access, COVID-19, retirement savings, consumption smoothing, precautionary liquidity, mental accounts

JEL Classification: I38, J26, J32

Suggested Citation

Bateman, Hazel and Dobrescu, Loretti Isabella and Liu, Junhao and Newell, Ben Rhodri and Thorp, Susan, Determinants of Early-Access to Retirement Savings: Lessons from the COVID-19 Pandemic (May 27, 2022). UNSW Business School Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=4121240 or http://dx.doi.org/10.2139/ssrn.4121240

Hazel Bateman (Contact Author)

UNSW Sydney, CEPAR ( email )

High Street
Sydney, NSW 2052
Australia

Loretti Isabella Dobrescu

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

Junhao Liu

The Vanguard Group, Inc. ( email )

100 Vanguard Blvd
Malvern, PA 19355
United States

Ben Rhodri Newell

Independent

Susan Thorp

The University of Sydney Business School ( email )

Abercrombie Building
H70
The University Of Sydney, NSW 2006
Australia
0290366354 (Phone)

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