Most Australians remember 2020 for the obvious things; lockdowns, toilet‑paper battles, banana‑bread epidemics. But behind all that chaos, something far more important was cracking under pressure, the superannuation system itself.
While everyone was stuck at home baking sourdough, super funds were quietly being pushed into the biggest cash scramble in their history. Money was flying out the door faster than anyone had planned for, and the system that was supposed to be “set and forget” suddenly looked like it had been held together with Blu‑Tack and optimism.
For the first time ever, ordinary Australians got a glimpse, even if they didn’t realise it, of just how quickly a fund built on decades‑long timelines can strain, wobble, and very nearly snap when the cash calls hit all at once.
The Shock That Exposed the Cracks
It all kicked off in April 2020 when the government launched the COVID‑19 Early Release of Super Scheme (ERS), arguably the biggest real‑world stress test the super system has ever seen. Overnight, eligible Australians could take out up to A$20,000 of their retirement money across two rounds.
And they did.
According to the Australian Taxation Office (ATO), 4.55 million applications were approved between 20 April and 31 December 2020 — adding up to A$37.8 billion ripped straight out of super balances in less than a year. (ato.gov.au)
As the Reserve Bank of Australia (RBA) later put it in its 2021 Financial Stability Review, super funds “faced significant liquidity management challenges” during this period thanks to three simultaneous shocks;
1. Mass switching out of growth options,
2. Margin calls on hedging strategies, and
3. The ERS withdrawals themselves. (rba.gov.au)
Let me translate this, everything that could go wrong… went wrong at the exact same time.
The Numbers That Should Make You Sit Up
To really appreciate how intense this was, look at what happened in just the first two weeks;
- Over A$6 billion was withdrawn almost instantly. (apra.gov.au)
- Funds had to crank up their cash holdings from 9.5% of assets in December 2019 to 13.2% by June 2020 — a massive shift for such enormous portfolios. (rba.gov.au)
In other words: super funds started hoarding cash like the rest of us hoarded toilet paper.
Why Forced Sell‑Offs Became a Dangerous Reality
When you run a super fund, you’re not supposed to hand money out quickly.
The entire system is designed around long-term timeframes 10, 20, 40 years.
But suddenly people needed cash now, not in 2050.
So funds had to sell whatever they could liquidate fastest:
Equities? Sell them.
Bonds? Sell them.
Anything liquid? Gone.
Meanwhile the illiquid stuff, unlisted property, private equity, infrastructure, stayed locked up because you can’t exactly flog a toll road on Gumtree in a crisis.
And every time someone switched from a growth option into cash, more selling pressure landed on the fund. One person jumps? Annoying. Thousands jump? That’s an earthquake.
Member Switching: The Panic Button That Made Everything Worse
According to the RBA, switching activity hit extreme levels. Some large funds saw 3–4% of their total assets moved in a single quarter, and mid-sized funds saw up to 8%. (rba.gov.au)
That’s huge.
That’s “this shouldn’t be happening” huge.
Here’s the problem: while listed assets move minute-to-minute, unlisted assets are only revalued quarterly (or less). So if you switch out at the wrong moment, you may get an inflated or outdated price… and someone else wears the impact later.
That’s called cross-member inequity, and it’s a fancy way of saying:
“Some people got more than they should have, and others paid the price.”
Liquidity Risk: The Silent Killer No One Talks About
Here’s the truth no glossy super ad will ever tell you:
The biggest risk in super isn’t market volatility — it’s liquidity.
It’s the risk of your fund being forced to sell assets at the worst possible time to meet withdrawals or switches.
The RBA spelled it out clearly:
“During 2020, the superannuation industry faced significant liquidity management challenges due to three factors that arose simultaneously.” (RBA, 2021)
Those three factors didn’t just bruise the system — they exposed how vulnerable it really is.
The real lesson?
• Cash can evaporate overnight.
• Funds can be forced into early selling.
• Valuation lags distort fairness.
• Liquidity risk hides until it explodes.
Where Property Fits Into All This
Now, let’s talk about the SMSF/direct-property question — because this is where people often misunderstand the game.
Property inside super is not magically “safe”, but it does behave differently:
Property doesn’t face member stampedes There is no “switch to cash” button There is no run on liquidity You’re not forced to sell because millions of others are
It moves slower — which in a panicked system is sometimes a blessing.
And yes, property has its own risks (tenant issues, valuations, gearing pressure).
But here’s the key distinction:
Pooled funds face liquidity panics.
Direct property faces liquidity droughts.
Two very different beasts.
One is reactive.
The other is predictable.
One can collapse under sudden pressure.
The other gives you time to plan.
And time — in investing — is everything.
What You Should Take Away
Here’s what I want you to walk away with — clear, practical and unfiltered:
- Your super isn’t automatically safe just because someone else is steering the ship.
- Liquidity risk is real, structural and almost completely invisible until it erupts.
- What happened in 2020 wasn’t an anomaly — it was a warning.
- You have the right to ask your fund: What happens when everyone wants cash at once? How do you protect my balance?
- And if you prefer assets you can actually understand — assets that don’t get repriced at 2pm on a Tuesday because a fund manager sneezed — then it’s time to explore alternatives with your eyes open.
Because hope is not a retirement plan. Blind trust is not risk management. Awareness, ownership and clarity are.
And that’s exactly why more Australians are looking for strategies that give them control, not confusion — strategies where you know what you own and why you own it.
It’s why we built Super Equity Link in the first place: a pathway that replaces hidden mechanics with something tangible, transparent and built to last.
When the next stress test hits — and it will — you want to be standing on a structure you understand, not running from someone else’s liquidity problem.
Hope is not a retirement strategy.
Blind trust is not risk management.
Awareness is.
References
Australian Taxation Office. (n.d.). COVID-19 Early release of super. Retrieved from https://www.ato.gov.au/about-ato/research-and-statistics/in-detail/super-statistics/early-release/covid-19-early-release-of-super Australian Taxation Office+1
Association of Superannuation Funds of Australia. (2022). The COVID-related early release of superannuation – a retrospective look. Retrieved from https://www.superannuation.asn.au/wp-content/uploads/2023/09/220725_Early_Release_Paper_v10.pdf
Reserve Bank of Australia. (2021, April). Box C: What Did 2020 Reveal about Liquidity Challenges Facing Superannuation Funds? Financial Stability Review. Retrieved from https://www.rba.gov.au/publications/fsr/2021/apr/box-c-what-did-2020-reveal-about-liquidity-challenges-facing-superannuation-funds.html Reserve Bank of Australia+1
BNY Mellon. (2025, October 23). Australian Superannuation: Navigating Liquidity and Operational Resilience. Retrieved from https://www.bny.com/corporate/global/en/insights/australia-superannuation-liquidity-resilience.html bny.com