Half of Australia’s retirees expect to outlive their savings

Alison Banney 22 March 2017

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Three years ago only one in three retirees expected to outlive their savings balance, now it’s one in two.

Superannuation, or lack thereof, is becoming more of a concern for Australians each year. New research by Investments Trends has revealed the dire truth that over half (51%) of retirees are now expecting to outlive their savings, up from 33% just three years ago.

The new research reveals Australians are quickly losing confidence in their super and it’s ability to fund their retirement, with just 44% of those aged 40 and over feeling "retirement ready".

“Australians’ confidence about their retirement has deteriorated significantly over the past few years,” Investment Trends senior analyst King Loong Choi said.

“The ability to accumulate sufficient wealth, potential falls in the share market and regulatory changes to the superannuation rules are all contributing to Australians’ growing angst about their retirement future.”

Changes to superannuation coming into effect from 1 July 2017 could be contributing to this increased pessimism, some of which include:

  • Lowering the cap for concessional contributions from $30,000 to $25,000 per year. After this cap is reached, you can still add extra funds to your super balance, but you won’t receive any tax benefits.
  • A reduction in the income cap from $300,000 to $250,000 for contributions which are taxed at 30%.
  • A $1.6 million super transfer balance cap will be introduced on the total amount of superannuation that any person can transfer into retirement phase accounts.
  • Self Managed Super Fund holders will no longer be able to contribute additional money once their fund’s balance reaches $1.6 million.

With the changes fast approaching, and a lot of confusion among consumers as to what the changes actually are, the research revealed two in three Australians now recognise the need for financial planners to achieve their retirement goals.

Currently, Australians who engaged a financial planner were almost twice as likely to put their savings into retirement income products, while those who hadn’t engaged a financial planner spent four times as much on lifestyle expenses such as renovations and holidays.

“Super funds and financial planners are best-placed to inform, educate and advise Australians on their retirement finances,” Choi said.

“While retail funds have been top of mind for Australians’ retirement needs, the concerted effort from industry funds over the last few years in strengthening their retirement proposition has made them serious competitors for Australians’ retirement monies,” said Choi.

Just yesterday it was revealed that Industry super funds have outperformed bank-owned retail funds by more than 2% over the last decade.

To learn more about how the superannuation changes could affect you, check out our guide.

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