Two out of three working Australians expect to run out of retirement savings by age 70 and four out of five anticipate running out before age 80 according to Mercer’s latest Superannuation Sentiment Index. There is a looming retirement funding crisis and Australians are not retirement ready says Mercer.
Mercer’s Superannuation Sentiment Index reveals retirement readiness is declining in Australia with only 30% of working Australians believing they will have enough savings to last past the age of 70, down from 36% two years ago. Only 23% felt they will have enough to last beyond 80 years of age, compared to 27% two years ago, and just 15% are confident they will have enough money to last beyond 90 years of age.
The majority of working Australians believe superannuation will be a critical contributor to retirement savings, accounting for 48% of their projected funding, but clearly won’t be enough to last their expected lifetime. Anticipated reliance on government assistance is at all time low (8%), suggesting an increased understanding the government provided Age Pension won’t be enough for many.
Australians’ overall satisfaction with their super funds rose to the highest levels since the Index began in 2008, but still only remains at ‘moderate’. Primary concerns about super remain centered on global economic conditions, share market fluctuations and legislative changes regarding how super is taxed.
“Australians are generally confused and uncertain about preparing financially for their retirement. They understand adequate super is the key to a comfortable retirement but they don’t know how to make good decisions that will meet their long-term needs,” said Mr David Anderson, Mercer’s Managing Director and Market Leader, Pacific Market.
“Super funds, employers, and the government all have a challenge to improve retirement readiness in this country. It’s a challenge with social and economic worthwhile outcomes and super funds shouldn’t lose sight of the bigger picture while presently entangled in Stronger Super compliance.
By delivering quality digital experiences, increasing access to financial advice and enhancing defaults Super funds can go a long way to empowering individuals to take control of and secure their retirement income.
“Super funds need to offer more online tools and education to help their members get a clearer picture of their retirement income; they need to offer more tailored, simple, and accessible financial advice,” said Mr Anderson
”Employers need to adopt financial literacy programs offered by super funds and financial planners; and consider phased retirement for their workers.
“The government needs to stop tinkering with super so we can rebuild some confidence in a system that requires long-term stability and clarity,” Mr Anderson said.
Confused state of play: Financial literacy tested
For the first time, Mercer’s Index tested respondents on their understanding of super related terms and concepts, to gauge levels of financial literacy. Less than one in four (22%) correctly answered seven or more, out of ten questions. A similar proportion (19%) answered less than two out of 10 correctly. Only 17% of respondents had heard the term ‘MySuper’ and only 7% had heard of ‘Stronger Super’.
“The vast majority of working Australians are confused by super. They are unsure about the rules and the goal posts just keep moving Australian workers want help to become retirement ready,” Mr Walsh said.
Over half (53%) of respondents believe their employer should be helping them manage their overall financial wellbeing and to be retirement ready. Respondents showed a lack of understanding about basic terminology and the rules regarding accessibility to funds.
“Employers, government and superannuation funds all have an important role to play in educating working Australians about financial and retirement planning, which will be a fundamental step in trying to combat the looming retirement funding crisis,” Mr Walsh said.
Mercer is a global leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 55,000 employees worldwide and annual revenue exceeding $12 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. Follow Mercer on Twitter @MercerAU @MercerInsights