A survey on retirement income by National Seniors Australia and Challenger has ruled the super system a “major success”.
Conducted in the lead up to the 30th anniversary of compulsory super which coincided with the implementation of the Retirement Income Covenant, the two firms found that a majority of retirees believe compulsory super has enabled them to enjoy a comfortable retirement.
“The report shows us 90 per cent of retirees have used super as their main source for accumulating retirement capital,” commented National Seniors CEO and director of research, John McCallum.
“In short, compulsory super delivers what it was designed for — to provide retirees with an income that maintains their working life standard of living.”
The research revealed that super is the main source of retirement income for respondents followed by the age pension. In total, 85 per cent of people said they had accumulated super for their retirement and 75 per cent were satisfied with their financial security.
However, Challenger head of retirement income research, Aaron Minney, noted that there was a reluctance from retirees to increase the drawdown of their super to further improve their lifestyle.
“The National Seniors survey shows that retirement income reforms could not have come at a better time,” Mr Minney said.
“Many retirees cut back on their lifestyle rather than spending their savings for the purpose it was intended. Hoarding the nest egg means they are missing out on some of what they could enjoy.”
The Retirement Income Covenant, which came into effect on 1 July, requires super trustees to develop a retirement income strategy in order to maximise retirement income for their members and properly manage associated risks.
Having money available for future health and medical costs was the top reason for preserving retirement capital for almost 84 per cent of the survey respondents, while 70 per cent said they had set aside money to cover other unexpected expenses or emergencies.
The research also highlighted a disparity between men and women when it comes to retirement income, with Professor McCallum noting that women trail men “on just about every score on superannuation”.
“More men enjoy a comfortable retirement from super, and more women than men have super balances so low, they are reliant on the age pension,” he said.
Of those surveyed, 82 per cent of women were found to have accumulated super for their retirement compared to 88 per cent of men.
Additionally, comfort in retirement was found to be higher among those who own their home. However only 2 per cent of those surveyed said they had accessed their home equity through the Pension Loan Scheme or a reverse mortgage.
“As the report has concluded, retirees and pre-retirees need better access to financial advice and user-friendly tools that account for the complexity of intersections between the retirement income system and peoples’ housing, health, aged care and employment circumstances,” Mr Minney said.
“Further, super funds need to have a strategy for managing the financial risks facing retirees and help them maximise their income in retirement.”
