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

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.