|Summary: A study on Australian superannuation by industry super fund REST has found that most over-50s are unprepared financially for retirement. There is generally a low level of understanding about the level of income needed to retire in comfort.|
|Key take-out: Constant tinkering to superannuation legislation has done little to engender stability and confidence.|
|Key beneficiaries: Superannuation accountholders. Category: Superannuation.|
The numbers paint the picture, and it is not a pretty one.
Two decades into the great social experiment that is Australia’s self-funded superannuation system, an alarming number of soon to be retired baby boomers are discovering that their lives will not be as comfortable as they had hoped.
A wide-ranging study on Australian superannuation by industry super fund REST – titled The Journey Begins – has found that by 2020, Australia may have 340,000 retirees who never wanted to leave work in the first place.
The changing nature of the employment market, greater longevity and a trend towards delaying having children will see many older Australians with dependents on their hands who must eke out a living on insufficient retirement funds and the aged pension.
The most alarming findings from the survey, however, relate to the financial preparedness of those about to retire.
Of the 1,200 over-50s Australians surveyed, only 14% thought they were financially prepared for retirement, 32% were “somewhat unconfident” about achieving their desired lifestyle, while 16% said they had no idea as to how much they would need.
REST chief executive, Damian Hill, says more needs to be done to educate Australians about the challenges facing them once they leave the workforce.
“While people are expecting to tighten their belts to some extent, there is a real reluctance to compromise on the rewards in retirement,” he says.
“Of particular concern, we also found a distinctly low level of understanding about the level of income needed to retire in comfort.
“This suggests that expectations may not be marrying with the reality many retirees will have to face and could be a very hard lesson to learn,” Hill says.
Most of those surveyed were surprisingly unprepared for what lay ahead, leaving it very late in their working lives to begin planning, Hill says. And a clear majority of baby boomers appeared reluctant to seek financial advice.
While some declared they would handle their own affairs, many considered financial advice to be too expensive or untrustworthy. That is a challenge for the financial planning industry and also an opportunity for the low-cost advice models provided by some super funds.
Hill believes the Australian superannuation experiment is a work in progress, that much needs to be done to build a solid second leg – that stands beside the age pension – that will stand Australians in good stead.
But he admits the constant tinkering with tax arrangements and contributions, compulsory and voluntary, by both sides of politics has done little to engender stability and confidence.