Mortgage offset accounts flooded with early super money

As we know, early withdrawals from superannuation ballooned to $28.0 billion in the week ended 19 July:

The Australian Treasury now expects about $41.9 billion in total to be withdrawn from super funds, compared with its previous forecast of $29.5 billion.

Analysis of banking data shows that most of this money is being saved, used to reduce debts or placed in mortgage offset accounts:

Government analysis of banking sector data has indicated the “vast majority” of the early release payments are being saved, placed in offset accounts to reduce mortgage interest payments or put ­towards debt repayment.

About 58 per cent of early ­release payments are classified as “saved/unspent” and remain in workers’ accounts…

“We know almost 60 per cent of those accessing their super early have used it or plan to use it to meet essential day-to-day ­expenses, including paying down debts, with another 36 per cent adding the money to their savings,” the Treasurer said…

Separate Australian Bureau of Statistics survey data has suggest­ed that 60 per cent of those ­accessing their superannuation early had used it to meet essential day-to-day expenses — including debt repayment – while a further 36 per cent had added the money to their savings.

Paying down one’s mortgage is a good use of savings. The interest saved is pre-tax, so based on an average discount mortgage interest rate of 3.65% and a marginal tax rate of 30%, implies an after-tax return of 4.7%.

Most Australians would also value keeping a roof over their heads above a bit of additional retirement income in 30-plus years.

Leith van Onselen


  1. Heh, so for all the $ pulled out of super it’s going to pay down debt and not likely to lead to any increased economic activity. As a double whammy those who have withdrawn super on hardship grounds will have some trouble accessing new loans or refinancing options.

  2. “Paying down one’s mortgage is a good use of savings. The interest saved is pre-tax, so based on an average discount mortgage interest rate of 3.65% and a marginal tax rate of 30%, implies an after-tax return of 4.7%.”

    Agreed. My company has an old DB scheme that was closed decades ago. I have been watching the monthly change in the rolling 12 month performance for that DB scheme (which has an aggressive investment profile).

    The 1 year performance has tracked:
    Feb 9.5%
    March 2.6%
    April 1.5%
    May 4.0%

    So that after tax return stacks up to what you’d have if you left it in there anyway.

    • In all honesty it is better than most “Cash” options in super anyway. Most cash options in super are paying between 2-3% pre tax which is at the very low end of what people would save in they put it in their offset account as this article mentions.

      In COVID where there is high uncertainty about future investments it could easily seen as just rebalancing some of your portfolio to a better cash option than most super funds can deliver rather than an “act of irresponsibility” as advised by most media articles.

    • Yep. He means equivalent to an investment making 4.7% of which you would have to pay tax on to get an equivalent after tax return of your mortgage cost.

  3. Jumping jack flash

    In my opinion early access to super was provided with it being used to service or obtain debt in mind, so everything is going according to plan. Its basically getting the people to bail out the banks with their own money. Almost Howard-level cunning. Well done Scomo, I didn’t know you had it in you.

    The massive reduction in total mortgage debt from 2.1 trillion in Feb to around 1.8 trillion now is probably in part due to this early access to super, which would be better for the economy than had all that money come from discretionary spending, say.

    The other thing to watch for soon is a resurgence of FHBs using their super money for a deposit, in addition to the FHB deposit subsidies on offer. This is also an intended result.

    • Nah, the libs are frothing about the industry super fund union thing. Now they’re close to the only game in super town they want to undermine the system ASAP. They just found their opportunity. They know the average Australian is a degenerate, give them a taste and they’ll want the lot. Plus how else are they going to get people spending over the next few years. I wouldn’t be shocked to see it as full withdrawal in 21/22 FY.

  4. Paying down one’s mortgage is a good use of savings.
    Agree. The only better use would be to use it as a deposit for another property purchase. Borrow as much as the bank allows. Don’t wait for the market to bottom, make an offer today, as much your budget allows to secure your dream home. It won’t make a difference in a decade or two.

  5. if its truly being used to pay down debt, we should see the money supply reducing

    But its still going up

    government deficit +25 billion
    private debt -9 billion

    Asset prices up

    • Dave666MEMBER

      You don’t really believe that the total economy and asset priced are determined by only these two items?
      I am having one of those days when its difficult telling if comments are sarcasm or genuine.

      • yes dave666, money supply is determined by the levels of private and public debt

        that is exactly how it works

        Then the only other factor that is relevant to asset prices is interest rates (and their relative yields)

  6. Forrest GumpMEMBER

    The LNP is attacking the Industry super funds by legalising asset transfer-out of the super funds and into the bank.

    The government just gave the banks $41 billion dollars in a single hit without a hit to the budget.

    why is this not front page news?

    That’s a lifeline to the banks. Anything to keep the property market from failing on Scotty’s watch…ANYTHING!!

      • I’ve got 2 funds, Hostplus which only has 3 years of low income part time contributions, and Colonial First State. I took my full 10K out of Colonial, mainly cos that had a balance of 17K, and my Hostplus had less than 4K in it after the market crash. I had less than 25K in super mainly cos I’ve loved o/s most of my adult life and I figure owning a house is better for my long term financial independence so it’s sitting in the bank waiting for an opportune moment to go towards the house deposit. If I don’t use it for that, I’ll put it back into super some time after I know the market crash is well and truly over and it isn’t at risk of being lost. In the meantime it can earn a crappy return in a savings account. So I figure I’m being financially responsible. The ATO may disagree but I was receiving JS when I took it out (and I still am in locked down Vic)

  7. “Most Australians would also value keeping a roof over their heads above a bit of additional retirement income in 30-plus years.”

    And for that same reason, FHBers will be using it to top up deposits they have already saved. If they have to wait 3 or 6 months until they can apply – such that the amounts are not seen on their savings history – then so be it. It just means they’ll get more house for their dollar.

  8. How do they know where the money is going? I withdrew $10k and put it into my bank, haven’t spent it yet. I would put it down on the mortgage but I have a limit of $9k extra per year before I start getting penalised and my interest rate is 2.8% and amount of debt low so it’s impact is small.

    I think I’d be better off spending it on solar panels to offset power costs.

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