Australians spend all their super in retirement, draw down on super more than the minimum required, find retirement and super overly complex, and crave more information from their funds on how to navigate the system, new research shows.
The Super Members Council retirement income submission to Treasury made a series of recommendations to simplify the system for members while ensuring it can accommodate flexibility and differing needs of Australia’s increasing number of retirees.
Combining consumer research, super fund data, and analysis of publicly available information, the submission found that contrary to prevailing commentary, retirees were not underspending in retirement.
Rather, it found that two in three people are drawing income from their super above the minimum required in retirement and 90 per cent of men and 80 per cent of women have no super left when they reach their life expectancy age.
It said that while retirees’ stated ambition is to retire at 67, the data showed that about a third have accessed their super at 63 and about 25 per cent still work into their 70s.
SMC’s submission also found the median balance at retirement was $200,000 and it expected the median earning 30-year-old to retire with $500,000.
SMC chief executive Misha Schubert said Australians approaching retirement want more information and advice, with 73 per cent of members stating they would trust advice from their super funds if it were specifically tailored to their circumstances.
“Financial advice remains the missing piece in the retirement puzzle and to help members the agreed reforms to financial advice should be legislated this year,” she said.
The SMC recommended that to make retirement simpler while maintaining its flexibility to meet retirees’ needs, the government should “swiftly” consult and legislate the retirement and super component of the financial advice reform package before the end of this year.
It also said the government should make it easier for members to switch into retirement products and end the current ban on being able to add contributions to a retirement phase super account.
Additionally, with member permission, the government should notify super funds about their members’ eligibility for pensions and other government support so members can be given tailored information on how to maximise their retirement income.
Finally, the SMC said a comprehensive retirement test should be developed that measures a broad set of factors including investment performance, flexibility to access funds in retirement, and giving people control over the level of risk they want.
