IDEAS home Printed from https://ideas.repec.org/a/eee/ecanpo/v75y2022icp716-733.html
   My bibliography  Save this article

Allowing early access to retirement savings: Lessons from Australia

Author

Listed:
  • Wang-Ly, Nathan
  • Newell, Ben R.

Abstract

In response to the COVID-19 pandemic, many governments around the world introduced policies aiming to provide citizens with financial relief through early access to their retirement savings. In Australia, the Early Release of Super (ERS) scheme allowed eligible citizens to withdraw up to A$20,000 in funds between April and December 2020. Using data provided by a large Australian bank, we examine the characteristics of the individuals who withdrew, how they used the withdrawn funds, and what impact this had on their financial wellbeing. We find that the scheme achieved its intended goal of providing immediate financial support to citizens in need. The scheme was primarily accessed by individuals in poorer financial circumstances, and helped withdrawers to pay down high-interest debts and avoid arrears. Based on our findings, we consider the implications for governments looking to implement similar policies in the future, as well as the opportunities to support individuals who have now withdrawn from their retirement savings.

Suggested Citation

  • Wang-Ly, Nathan & Newell, Ben R., 2022. "Allowing early access to retirement savings: Lessons from Australia," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 716-733.
    • Handle: RePEc:eee:ecanpo:v:75:y:2022:i:c:p:716-733
    DOI: 10.1016/j.eap.2022.07.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0313592622001060
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eap.2022.07.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Gopi Shah Goda & Colleen Flaherty Manchester & Aaron Sojourner, 2012. "What Will My Account Really Be Worth? An Experiment on Exponential Growth Bias and Retirement Saving," NBER Working Papers 17927, National Bureau of Economic Research, Inc.
    2. Matthew Rabin & Ted O'Donoghue, 1999. "Doing It Now or Later," American Economic Review, American Economic Association, vol. 89(1), pages 103-124, March.
    3. Goda, Gopi Shah & Manchester, Colleen Flaherty & Sojourner, Aaron J., 2014. "What will my account really be worth? Experimental evidence on how retirement income projections affect saving," Journal of Public Economics, Elsevier, vol. 119(C), pages 80-92.
    4. Annamaria Lusardi & Daniel Schneider & Peter Tufano, 2011. "Financially Fragile Households: Evidence and Implications," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(1 (Spring), pages 83-150.
    5. Robert Argento & Victoria L. Bryant & John Sabelhaus, 2015. "Early Withdrawals From Retirement Accounts During The Great Recession," Contemporary Economic Policy, Western Economic Association International, vol. 33(1), pages 1-16, January.
    6. Arvid O. I. Hoffmann & Simon J. McNair, 2019. "How Does Consumers' Financial Vulnerability Relate to Positive and Negative Financial Outcomes? The Mediating Role of Individual Psychological Characteristics," Journal of Consumer Affairs, Wiley Blackwell, vol. 53(4), pages 1630-1673, December.
    7. Sumit Agarwal & Jessica Pan & Wenlan Qian, 2020. "Age of Decision: Pension Savings Withdrawal and Consumption and Debt Response," Management Science, INFORMS, vol. 66(1), pages 43-69, January.
    8. John Beshears & James J. Choi & Joshua Hurwitz & David Laibson & Brigitte C. Madrian, 2015. "Liquidity in Retirement Savings Systems: An International Comparison," NBER Chapters, in: Insights in the Economics of Aging, pages 45-75, National Bureau of Economic Research, Inc.
    9. repec:adr:anecst:y:2008:i:91-92:p:11 is not listed on IDEAS
    10. Robert L. Clark & Annamaria Lusardi & Olivia S. Mitchell, 2021. "Financial Fragility during the COVID-19 Pandemic," AEA Papers and Proceedings, American Economic Association, vol. 111, pages 292-296, May.
    11. Miguel Lorca, 2021. "Effects of COVID‐19 early release of pension funds: The case of Chile," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 88(4), pages 903-936, December.
    12. Zhao, Zhong, 2008. "Sensitivity of propensity score methods to the specifications," Economics Letters, Elsevier, vol. 98(3), pages 309-319, March.
    13. Catherine, Sylvain & Miller, Max & Sarin, Natasha, 2020. "Relaxing household liquidity constraints through social security," Journal of Public Economics, Elsevier, vol. 189(C).
    14. Carlos Cinelli & Chad Hazlett, 2020. "Making sense of sensitivity: extending omitted variable bias," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 82(1), pages 39-67, February.
    15. Ho, Daniel & Imai, Kosuke & King, Gary & Stuart, Elizabeth A., 2011. "MatchIt: Nonparametric Preprocessing for Parametric Causal Inference," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 42(i08).
    16. Greninger, Sue A. & Hampton, Vickie L. & Kitt, Karrol A. & Achacoso, Joseph A., 1996. "Ratios and benchmarks for measuring the financial well-being of families and individuals," Financial Services Review, Elsevier, vol. 5(1), pages 57-70.
    17. Brüggen, Elisabeth C. & Hogreve, Jens & Holmlund, Maria & Kabadayi, Sertan & Löfgren, Martin, 2017. "Financial well-being: A conceptualization and research agenda," Journal of Business Research, Elsevier, vol. 79(C), pages 228-237.
    18. Richard G Netemeyer & Dee Warmath & Daniel Fernandes & John G LynchJr. & Eileen FischerEditor & Olivier ToubiaAssociate Editor, 2018. "How Am I Doing? Perceived Financial Well-Being, Its Potential Antecedents, and Its Relation to Overall Well-Being," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 45(1), pages 68-89.
    19. Rajeev H. Dehejia & Sadek Wahba, 2002. "Propensity Score-Matching Methods For Nonexperimental Causal Studies," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 151-161, February.
    20. Eberhardt, Wiebke & Brüggen, Elisabeth & Post, Thomas & Hoet, Chantal, 2021. "Engagement behavior and financial well-being: The effect of message framing in online pension communication," International Journal of Research in Marketing, Elsevier, vol. 38(2), pages 448-471.
    21. King, Gary & Nielsen, Richard, 2019. "Why Propensity Scores Should Not Be Used for Matching," Political Analysis, Cambridge University Press, vol. 27(4), pages 435-454, October.
    22. Amromin, Gene & Smith, Paul, 2003. "What Explains Early Withdrawals From Retirement Accounts? Evidence From a Panel of Taxpayers," National Tax Journal, National Tax Association;National Tax Journal, vol. 56(3), pages 595-612, September.
    23. Joanna Stavins, 2021. "Unprepared For Financial Shocks: Emergency Savings And Credit Card Debt," Contemporary Economic Policy, Western Economic Association International, vol. 39(1), pages 59-82, January.
    24. Victor Stango & Jonathan Zinman, 2009. "Exponential Growth Bias and Household Finance," Journal of Finance, American Finance Association, vol. 64(6), pages 2807-2849, December.
    25. Michael Lechner, 2008. "A Note on the Common Support Problem in Applied Evaluation Studies," Annals of Economics and Statistics, GENES, issue 91-92, pages 217-235.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bateman, Hazel & Dobrescu, Loretti I. & Liu, Junhao & Newell, Ben R. & Thorp, Susan, 2023. "Determinants of early-access to retirement savings: Lessons from the COVID-19 pandemic," The Journal of the Economics of Ageing, Elsevier, vol. 24(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bateman, Hazel & Dobrescu, Loretti I. & Liu, Junhao & Newell, Ben R. & Thorp, Susan, 2023. "Determinants of early-access to retirement savings: Lessons from the COVID-19 pandemic," The Journal of the Economics of Ageing, Elsevier, vol. 24(C).
    2. Hoffmann, Arvid O.I. & Plotkina, Daria, 2020. "Why and when does financial information affect retirement planning intentions and which consumers are more likely to act on them?," Journal of Business Research, Elsevier, vol. 117(C), pages 411-431.
    3. Goda, Gopi Shah & Jones, Damon & Ramnath, Shanthi, 2022. "Temporary and permanent effects of withdrawal penalties on retirement savings accounts✩," Journal of Public Economics, Elsevier, vol. 215(C).
    4. López, Fernando & Rosas, Guillermo, 2022. "COVID-19 and attitudes towards early withdrawal of pension funds: The role of trust and political ideology," The Journal of the Economics of Ageing, Elsevier, vol. 23(C).
    5. Kleimeier, Stefanie & Hoffmann, Arvid O.I. & Broihanne, Marie-Hélène & Plotkina, Daria & Göritz, Anja S., 2023. "Determinants of individuals’ objective and subjective financial fragility during the COVID-19 pandemic," Journal of Banking & Finance, Elsevier, vol. 153(C).
    6. Osvaldo García-Mata & Mariana Zerón-Félix, 2022. "A review of the theoretical foundations of financial well-being," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 69(2), pages 145-176, June.
    7. Margaret Miller & Julia Reichelstein & Christian Salas & Bilal Zia, 2015. "Can You Help Someone Become Financially Capable? A Meta-Analysis of the Literature," The World Bank Research Observer, World Bank, vol. 30(2), pages 220-246.
    8. Goda, Gopi Shah & Levy, Matthew R. & Flaherty Manchester, Colleen & Sojourner, Aaron & Tasoff, Joshua & Xiao, Jiusi, 2023. "Are retirement planning tools substitutes or complements to financial capability?," Journal of Economic Behavior & Organization, Elsevier, vol. 214(C), pages 561-573.
    9. Noviarini, Jelita & Coleman, Andrew & Roberts, Helen & Whiting, Rosalind H., 2023. "Financial literacy and retirees' resource allocation decisions in New Zealand," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    10. Sandro Ambuehl & B. Douglas Bernheim & Annamaria Lusardi, 2022. "Evaluating Deliberative Competence: A Simple Method with an Application to Financial Choice," American Economic Review, American Economic Association, vol. 112(11), pages 3584-3626, November.
    11. Matthew R Levy & Joshua Tasoff, 2016. "Misunderestimation: exponential-growth bias and time-varying returns," Economics Bulletin, AccessEcon, vol. 36(1), pages 29-34.
    12. McGowan, Féidhlim & Lunn, Pete & Robertson, Deirdre, 2019. "Underestimation of money growth and pensions: Experimental investigations," Papers WP611, Economic and Social Research Institute (ESRI).
    13. Hampson, Daniel P. & Gong, Shiyang & Xie, Yi, 2021. "How consumer confidence affects price conscious behavior: The roles of financial vulnerability and locus of control," Journal of Business Research, Elsevier, vol. 132(C), pages 693-704.
    14. Königsheim, C. & Lukas, M. & Nöth, M., 2018. "Individual preferences and the exponential growth bias," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 352-369.
    15. Carole Comerton‐Forde & John de New & Nicolás Salamanca & David C. Ribar & Andrea Nicastro & James Ross, 2022. "Measuring Financial Wellbeing with Self‐Reported and Bank Record Data," The Economic Record, The Economic Society of Australia, vol. 98(321), pages 133-151, June.
    16. Sumit Agarwal & Jessica Pan & Wenlan Qian, 2020. "Age of Decision: Pension Savings Withdrawal and Consumption and Debt Response," Management Science, INFORMS, vol. 66(1), pages 43-69, January.
    17. Tim Kaiser & Lukas Menkhoff, 2017. "Does Financial Education Impact Financial Literacy and Financial Behavior, and If So, When?," The World Bank Economic Review, World Bank Group, vol. 31(3), pages 611-630.
    18. Olckers, Matthew, 2021. "On track for retirement?," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 76-88.
    19. Nisha Prakash & Aparna Hawaldar, 2024. "Investigating the Determinants of Financial Well-Being: A SEM Approach," Business Perspectives and Research, , vol. 12(1), pages 11-25, January.
    20. Ifra Bashir & Ishtiaq Hussain Qureshi, 2023. "A Systematic Literature Review on Personal Financial Well-Being: The Link to Key Sustainable Development Goals 2030," FIIB Business Review, , vol. 12(1), pages 31-48, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecanpo:v:75:y:2022:i:c:p:716-733. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/economic-analysis-and-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.