Inflation erodes retirement confidence

More than half of Australian retirees (59%) have said that the recent inflationary environment has made them review the way they think about the retirement, with 54% opting for a more conservative investment approach.

According to the 2023 MFS Global Defined Contribution Survey, the vast majority (74%), said they would now need to save more than they previously planned, 61% said they would need to work for longer and 40% no longer see themselves as retiring at all.

The change in approaching the retirement will have the potential consequences for Australia’s $3.5 trillion superannuation sector and future workforce.

According to the study, the effects of inflation would have a greater impact on retirement confidence that any other events over the last three years, including COVID.

Even though the study, which interviewed 1,000 Ausssie superannuants as part of a global survey, has confirmed that 35% believed they would ever retire, the age Australians expected to retire (66) remained unchanged, with close to 70% of respondents having admitted that they would expect a more gradual transition in which they reduce hours or switch jobs and some (15%) expecting a hard stop as they cease working for a salary.

At the same time, 36% of respondents said that family and friends were the first contact to search for advice, and 28% turned to their employers to find an adviser.

Although online tools, such as retirement calculator, remained popular, 33% of Australians preferred in-person or video contact with a human adviser.

Joshua Barton, managing director and head of Australia and New Zealand at MFS Investment Management, said that although the loss of retirement confidence among Australians was on par with their counterparts in other countries, the change has highlighted the new ways the advice could play in helping investor meet their retirement goals.

“We need to continue to open pathways to advice across the superannuation system, including through superannuation funds and employers and new technologies to support Australia’s sophisticated yet smaller advice market,” he said.

“This is particularly important as the industry readies for superannuation’s historic transition from savings accumulation to income drawdown; we must embrace the regulatory and legislative relief changes geared towards delivering better financial outcomes that can help insulate retirees, current and future, from market cycle stress.”