Australians’ confidence in retirement income adequacy slumps

Mike Taylor

Managing Editor/Publisher, Financial Newswire

10 November 2022

Australians have lost confidence in their ability to retire comfortably fuelled by the pandemic and global economic uncertainty but twice as many are turning to their superannuation funds as those who turn to financial advisers.

The 2022 Investment Trends Retirement Income Reports has revealed that confidence levels have plummeted to a 10-year low with respect to pre-retirees feeling prepared for their next stage in life.

According to Investments Trends only half cited they feel prepared for retirement, down from 75% in 2021.

“Non-retirees expect their income in retirement to be on average $3,200 per month and considering they perceive the income required for a comfortable retirement to be on average $4,300 per month, 47% expect to outlive their retirement savings,” the analysis said.

“Concerns about the cost of medical treatment (43%, up from 32% in 2021) and inflation (42%, up from 28% in 2021) are the main drivers of this murky outlook,” Investment Trends said.

Investment Trends research director, Dougal Guild said the research revealed that, in addition to relying on the Government Age Pension, non-retirees were making plans to reduce their spending and delay the start of their retirement in order to close what they perceived as a retirement adequacy gap.

The study revealed that when the time comes to access the right retirement solution, many Australians were largely unaware of the retirement income products offered by their main super fund or are unconvinced those on offer are fit-for-purpose.

“Non-retirees recognise longevity protection (34%), a guaranteed minimum income (27%), and flexible access to funds (25%), as the most essential features to be offered. However, many who value these features do not know they exist in current offerings, for example only 7% of non-retirees are aware of a retirement income product that provides protection against market falls.”

“Preference for retirement products varies significantly by age, super balance and evolves over time. We found that many members are unable to articulate their requirements, highlighting the importance of providing both education and advice at this life stage,” said Guild.

The research found that fear of not having enough money to retire is driving non-retirees to seek retirement-related information and wanting to be better prepared.

It suggested the obligation for super funds to publish their Retirement Income strategy appears to be delivering positive outcomes with super funds remaining the most used source of retirement information (63%), followed by financial advisers (33%).

Retirement calculators and financial advice have been found to elicit repeat engagement and can be great digital conversation starters. Non-retirees also shared that they are seeking enhancements around projections of the cost of living for different lifestyles, expected weekly income, and inflation adjustments.

“Providing this support and broader advice options is imperative as advice proves to bolster confidence in retirement,” added Guild.