Despite 25 years of compulsory superannuation in Australia, most people fail in preparing for retirement, according to the Retirement Readiness Report.
The study, which was conducted jointly by the American Academy of Actuaries, The Australian Actuaries Institute and the Institute and Faculty of Actuaries in the United Kingdom, also found that it was mainly procrastination that was driving a lack of preparation for retirement.
According to its author and chartered accountant Wayne Wanders, the Australian superannuation system should be reviewed in the light of the report and consider the following factors:
- The average age of retirement is increasing;
- Many people are planning not to retire at all;
- Most are planning to retire gradually rather than fully;
- Many are planning to retire after they turn 70; and
- Relatively few are expecting a comfortable lifestyle in retirement.
According to him, there were two key changes that the Government and the superannuation industry should consider.
“Right now, people get their annual super statement and it has a balance,” he said.
“But very few people actually understand what that really means for them in retirement. We need to convert that to a payment stream in retirement.”
He pointed out that the balance of $50,000, at an earnings rate of five per cent, would translate over 15 years into a monthly payment of $395.
He also stressed that the government should set the earnings rate and period of drawdown, so that everyone was “comparing apples with apples”.
“And the other change is that all Australians need better education around financial literacy, especially around how financial decisions today impact on future retirement outcomes,” Wanders said.