The Journey Begins:

Research released today by REST Industry Super, one of Australia’s largest superannuation funds with more than $37 billion invested on behalf of members, has revealed that older working Australians have big plans for their retirement, but that these may not match the reality of their superannuation savings.

The Journey Begins, an annual white paper commissioned by REST, captured the attitudes of just over 1,000 working Australians aged 50 or over toward their financial situation, plans and expectations as they set out on the road to retirement.

The research showed that 72% of older working Australians with adult children are planning to help them financially, primarily by drawing down from their superannuation balances on retirement.

Of the reasons why retirees were planning to draw down on their superannuation to help their children, organising to leave a significant inheritance (36%) topped the list, followed by helping to pay school fees for their grandchildren (29%), helping their children afford a holiday (27%) and helping their children pay for a deposit on a house (21%).

The research also found older working Australians expect to have a shortfall of funds in retirement, with nearly a third of those aged over 50 having a balance of less than $100,000. Half of the survey respondents believe they’ll need to rely solely on the Age Pension to fund their retirement.

And while only 55% of older Australians expect realistically to be able to afford a ‘modest’ retirement, three in five (60%) say that a modest retirement will not be enough to fund their retirement plans. Only 39% of those surveyed expect to be able to fund what they defined as a comfortable retirement.

REST Industry CEO Mr Damian Hill said that while the findings indicated that older working Australians were conscious of the need to plan for retirement, they also showed most are still expecting to rely on the Age Pension, equity in their home or government payments to support their retirement.

“Older working Australians are planning to work longer to provide themselves with the retirement they’d like to enjoy – respondents in this survey on average said they want to retire at 67 but expect to do so at 69,” Mr Hill said.

“Part of the reason for this shortfall is that older working Australians – the baby-boomer generation - have only been accumulating meaningful superannuation since the compulsory guarantee levy was introduced in 1992, so don’t have the benefit of decades of savings to retire on,” Mr Hill said.

According to the REST survey, inheritance is expected to be a key factor of retirement funding. Of the 31% of respondents who expect to receive an inheritance, nine in 10 anticipate putting at least some this windfall toward funding retirement.

At the same time, 32% of people surveyed believe rising housing prices mean they will need to pass on any money they inherit to their children to help fund a deposit on a house. Corelogic RP Data’s Home Value Index shows average property values in the Sydney market have increased by 76% since 2009, with strong increases in other states.

For people who had received an inheritance the average windfall was $110,000, while those anticipating a future inheritance expect to receive on average around $250,000.  

“What comes through clearly is the desire of people approaching retirement to ease the financial burdens their adult children face today, especially buying a house and covering school fees,” Mr Hill said.

“That’s laudable but we would urge retirees not to forget that their retirement savings are first and foremost meant to fund their own retirement, and using retirement savings for other purposes may mean they become a financial burden on their own children later in life.”

When probed on their attitudes toward accumulating superannuation, older workers appear to have reservations about self-managed super funds (SMSFs) as a savings model. Of the small number (one in ten) who are using an SMSF, a quarter wouldn’t have started one had they known how much work was involved. More than a third said their SMSF had made more money for their accountant than themselves.

“This suggests self-managed super funds aren’t appropriate for everyone. The cost to maintain an SMSF, both financially and in terms of time, is significant and usually more than what people think,” said Mr Hill.

Debate around proposed changes to superannuation regulations have knocked the confidence of older Australians, with 86% of respondents concerned that government intervention in the sector will actually damage their retirement savings.

“To us, this reinforces the need for the purpose of superannuation to be enshrined in legislation, so that future changes are aligned with the objective of superannuation toward funding retirement income,” said Mr Hill.

About REST Industry Super

REST is one of Australia’s largest super funds by membership with over $37 billion in funds under management as at 30 June 2015 and around two million members. SuperRatings awarded REST Pension of the Year 2015, the second year in a row REST has won this award. REST also received Money magazine’s 2015 and 2014 Best of the Best award for Best Super Fund Manager and Best Pension Fund Manager as well as receiving Super Fund of the Year for 2014 at the Chant West/Conexus Financial Super Funds Awards.*