Pre-retirees fear longevity risk: AustralianSuper

AustralianSuper is launching a retirement confidence index it says will shine a light on how the superannuation system can reduce anxiety among pre-retirees.

Created in conjunction with Monash University, the AustralianSuper Retirement Confidence Index aims to understand what drives trust and confidence for Australian superannuation members approaching retirement.

Research which led to the index's creation shows one-quarter of 1500 pre-retirees believe they will have saved enough for retirement. Most expect to rely more on superannuation than on the Age Pension for income in later years.

The survey of AustralianSuper and non-AustralianSuper members shows pre-retirees believe they will need an annual income of $51,000 in retirement, yet only 33% believe they will have accumulated enough to achieve that goal.

This is slightly higher than the Association of Superannuation Funds of Australia's (ASFA) retirement standard which suggests single retirees with $545,000 in savings can comfortably live on $43,000 per year for 25 years.

Further, about 50% of pre-retirees believe superannuation will be their main source of income in retirement. This is in comparison to 37% of retirees, demonstrating a tendency to rely on the Age Pension more.

To be clear, AustralianSuper and its research partner Forethought interviewed 4700 Australians (including the 1500 pre-retirees) over three phases.

The study found a majority of pre-retirees are expecting to work up to 10 years longer than those that have already retired and about 38% are feeling some anxiety about retiring.

The AustralianSuper Retirement Confidence Index also demonstrates an opportunity for financial advisers as 7% of respondents said they had spoken to a financial adviser in the past 12 months. More concerning, 60% of respondents admitted they don't have a plan for retirement.

Figure 1. AustralianSuper Retirement Confidence Index research
As such, AustralianSuper is urging all Australians to take steps to ensure their superannuation doesn't fall short in retirement.

The $120 billion super fund is hoping to educate members as to the benefits of compound interest, demonstrating that the earlier people start making voluntary contributions, the harder their money will work for them.

For example, if a 40-year-old female on a $65,000 salary that increases by 3.5% per year was to contribute an additional $10 a week, she will have accrued an additional $15,900 by age 65.

The industry fund said about 17% of all contributions into AustralianSuper accounts in the 2017 financial year were voluntary, amounting to more than $3 billion in contributions.

Commenting on the survey's findings, AustralianSuper head of brand and behaviour change Mario Garrido said: "By gaining a clearer insight into the thoughts and concerns the Australian public and AustralianSuper's members have about their future we hope to be able to better guide them through both the pre and post-retirement phases of their lives."

However, he added that retirement confidence is not just about money and superannuation funds have a major role to play in ensuring there is confidence in the whole retirement savings system.

"Our collective view of retirement needs to broaden so that it captures the four important areas that contribute to confidence during and just before retirement: building wealth, community, health and wellbeing and setting goals," Garrido said.

The research shows that 68% of pre-retirees surveyed believe retirement will provide opportunities to make new friends, though only 40% of respondents currently believe they will have a comfortable social life in retirement.

"Ultimately, the purpose of the AustralianSuper Retirement Confidence Index is to shine a light on how we can reduce anxiety among Australians in the pre-retirement phase of their lives in order to help them achieve the best possible retirement outcome," Garrido said.

Read more: AustralianSuperAustralianSuper Retirement Confidence IndexAge PensionASFAAssociation of Superannuation Funds of AustraliaMario GarridoMonash University
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