Super members 'clueless' on retirement income

Of 920 people surveyed who had money in a super fund and were retired or in their final years of work, most did not know the worth of the age pension and had not heard of lifetime annuities and allocated pensions.

"People were basically clueless about the features of retirement products," said Dr Hazel Bateman, director of the Centre for Pensions and Superannuation at the University of NSW, who is disappointed that Federal Parliament has approved a 3 per cent rise in the compulsory levy without addressing such consumer bewilderment.

The survey, called "retirement incomes for the dazed and confused" at one university presentation, revealed that of the 432 participants still working, more than one-quarter had thought a little or not at all about retiring. Almost one-third had given scant consideration to their finances in retirement.

The preliminary results are part of a broader five-year study by seven Sydney-based academics exploring how people make superannuation decisions.

They show the need to simplify the system for the 8 million workers set to pour billions more into the nation's $1.3 trillion superannuation kitty, Dr Bateman said.

"Government and the industry should pay more attention to making superannuation understandable to ordinary people, now that more of people's savings are going to be directed toward [it]," she said.

Ian Day, who heads the aged advocacy group COTA NSW, accused successive governments of confusing people by messing with the system and said the rise to 12 per cent by 2020 was too long coming.

It was difficult to look 10 years ahead, let alone the 25 years in retirement, he said, and many who were more than 47 years old were still unaware that they were headed for the age pension. Compulsory superannuation's full benefits will not kick in fully until 2032, too late for baby boomers, Mr Day said.

People aged 65 could expect to live another 20 to 25 years, but by 75 most would have used up their superannuation, leaving them with their homes and the age pension, he said.

Dr Bateman said although many over-50s would eventually receive a part pension, only one in five of those surveyed correctly answered that the age pension was between 25 and 30 per cent of male average weekly earnings.

Almost half said they had never heard of allocated account-based pensions. Yet half of all retirement income deposits are held in these accounts. A life annuity could ensure that money does not run out in advanced old age, but few knew about it, the study found.

The chief executive of the Association of Superannuation Funds of Australia, Pauline Vamos, said the federal government should make it mandatory for funds to indicate on members' statements what their monthly retirement income was likely to be on the basis of current savings.