Australian Get Real About Retirement

"The focus now needs to be on how to bridge the savings gap," said Philippa Smith, CEO of ASFA (The Association of Superannuation Funds of Australia).

Last year, ASFA commissioned ANOP Research Services to carry out the National Survey on Community Attitudes to Saving for Retirement, on a random sample of 755 Australians aged 30 to 69 years.

It follows on from a benchmark study in 2001, which explored similar territory. The comprehensive and wider-ranging 2004 study showed some marked changes in attitude in the ensuing three years, together with some new information.

How much is enough?

While the expectations of those still in the workforce had not changed, the ANOP research found that retirees’ perceptions of an adequate income had moved up.

As found in 2001, seven in ten of non-retired people in 2004 estimated that they will personally need a minimum annual income of at least $30,000 pa to maintain an adequate lifestyle in retirement. The majority of retirees also said the minimum adequate annual income they needed was $30,000. Significantly fewer (13 percent) said $20,000 was sufficient.

This is a substantial shift from 2001, when almost a quarter of retirees said they could live on $20,000 pa. It almost certainly reflects the fact that the first wave of babyboomers, (with higher expectations) are starting to retire.

"This reinforces the quantitative research findings of the ASFA-Westpac Retirement Living Standard index which indicated that $34,000 was needed by a single person and $43,000 for a couple to have a comfortable lifestyle in retirement," said Ms Smith.

In a sobering finding, the number of retirees feeling disappointed in retirement is increasing, with financial security emerging as a key determinant. In 2001, one out of four people reported unmet expectations: in 2004 it was one out of three.

Increasing Realism

"Delusion is dissipating. The message about the need to save more for an adequate retirement is starting to get through. Back in 2001, one in three believed their current savings would be adequate to fund their retirement expectations, unaware that the reality of this was unlikely," said Philippa Smith.

"In 2004 only one in eight were similarly deluded. But that delusion is being replaced by anxiety and agitation. The number of people uncertain and worried about their future has grown significantly."

Some of the key results illustrating this were:

· A seven in ten majority recognised nine percent compulsory super is not enough to provide an adequate retirement income.

· About half did not believe that their current savings would achieve a desired standard of living in retirement.

· More expected they would receive the age pension.

· More expected to work in retirement.

"The challenge for government, and funds, will be to establish solid policies and mechanisms through which the growing numbers of anxious individuals - and our ageing community - can achieve an adequate retirement income," Ms Smith said.

Delusion (or eternal hope) still remains in some attitudes as to how to bridge the gap.

Working in retirement is the nominated way of bridging the gap. Eight in ten would consider working longer to be able to fund their retirement - yet acknowledged that it will be difficult to find or keep paid work at that time in their lives. Six out of ten nominated selling or downsizing their homes (compared to the current reality of one in six who actually do so).

What should happen?

Seventy percent believed that government needs to do more about the ageing population. Encouraging people to save for retirement was amongst the top three suggestions along with aged care facilities and improving the health system.

Providing adequate incentives to save emerged as the government’s most important priority to help ensure an adequate income in retirement. Out of five options, reducing the super contributions tax and providing co-contributions for lower and middle income earners were the highest ranked alternatives.

"Saving more for retirement remains an essential peg and the only realistic option. When asked who should take responsibility, most people still clearly saw it as a joint effort between individuals and government," Ms Smith said.

Ensuring super fund fees are reasonable and making it easier to work while accessing super were middle order priorities. Encouraging people to work until age 70 received little support.

"This research flags a significant shift in Australians’ attitudes to savings and retirement. People are less under the ‘she’ll be right’ illusion about retirement. They know compulsory super isn’t going to be enough, and they’re apprehensive about how they are going to fund an adequate retirement future," Ms Smith pointed out.

"It’s vital that government and opposition clearly spell out concrete proposals for tackling our ageing demographics. Given the greater public focus and anxiety, this is important. They need to come up with the goods - solid planks and strategies to help people bridge the savings gap and reach an adequate retirement income."

One of the key implications of the 2004 National Survey on Community Attitudes to Saving for Retirement was that the message about adequacy was getting through. Some of the key survey results which illustrated this were:

· A seven in ten majority recognised nine percent compulsory super is not enough to provide an adequate retirement income.

· About half did not believe that their current savings would achieve their desired standard of living in retirement.

· Fewer said that they were relying solely on compulsory super as their main form of retirement saving than in 2001

· Those relying mostly on home ownership and compulsory super were least certain about having an adequate income in retirement

· More people expected they would receive the age pension than in 2001.

· More were considering work in retirement than in 2001

Article provided by aboutseniors.com.au. The National Survey on Community Attitudes to Saving for Retirement can be downloaded from the Policy - Reports page on ASFA’s website (www.superannuation.asn.au).