2017 marked the 25th year since compulsory employer superannuation was extended to all employees in Australia. Not that it has been all smooth sailing.
Since 1992, governments have made near continuous changes to superannuation regulations, taxation and the workings of the Age Pension. But what do those outside the financial services echo chamber think about superannuation and their retirement? And how do their views compare with others around the globe?
In this report we take a look at Australian workers’ attitudes as they approach retirement, and how they feel once they have entered retirement.
Here’s a preview of a few of the findings:
The need to save message has got through
One of the striking findings of the survey was that Australians of all ages accept personal responsibility for ensuring their income in retirement is adequate.
The shift from defined benefit to accumulation and the sense that superannuation is ‘deferred pay’ has doubtless helped this conviction, particularly compared to some European countries in our survey, where expectations of the state were much higher.
However, the majority of workers are not optimistic about retirement
While the message has got through about personal responsibility, it doesn’t mean Australians are particularly happy about it. Only one in five people in the workforce have a sense of optimism or happiness about their financial situation in retirement.
Digging a little deeper, 38% of the workforce thought they would not even get close to what they will need in retirement. Things improved when we asked people who were within 5 years of retirement, but even then, 26% thought they would not get close and a further 20% thought they would only get slightly close.
People are preparing to adapt to retirement realities
There is more than one way of coping with the pain. Firstly, we asked where people would be willing to cut back. It appears Australians are expecting to spend less on clothes, less on entertainment and less on technology when they retire. Many appear to want to use their home equity to fund retirement, with 46% of the working population expecting to live in a smaller house.
Next, we asked what other steps people would be willing to take. Close to a half of the workforce is gearing up to work part time with many also planning to retire later.
People want stability and flexibility when accessing savings
We were encouraged to see broader community expectations align with the key tenants of Treasury’s Comprehensive Income Product for Retirement (“CIPR”) proposal – including “efficient, broadly constant income”, “longevity risk management” and “some access to capital.”
Among the working population and those approaching retirement, the most popular choice was one that combined early flexibility with some measure of certainty in later life.
What does this mean for sponsors, schemes and the wider industry in helping members to achieve better retirement outcomes?