Retirement perceptions in Australia
Retirement perceptions in Australia
When it comes to retirement saving, Australia’s highly-regarded superannuation system makes it the most advanced country of those covered in this report. It is mandatory for the vast majority of working Australians to save for retirement, particularly now the $450 per month threshold has been abolished. This has created high coverage and particularly benefited women, who are disproportionately likely to earn below the $450 threshold that previously meant employers were not obligated to contribute to retirement funds.
The system offers retirees considerable flexibility on spending or investing their savings, but this comes at a cost. Superannuation providers are now acknowledging that this freedom does not always result in the best outcomes. With this in mind, the Retirement Income Covenant has now come into effect, handing superannuation funds a responsibility to innovate so that their members can have improved financial outcomes in retirement.
The knowledge gap is shrinking
People’s understanding of retirement finance is improving
In 2021, just 56% of Australian respondents said they have a good understanding of the options available to them in retirement. This year, that figure has jumped to 69%.
Men (76%) are more likely to report having a good understanding than women (61%). Surprisingly, and in contrast to other countries surveyed, there is no significant difference between younger and older respondents.
Although understanding of retirement finances is on the increase, almost a quarter (23%) of those aged 55 or older say they don’t understand their options. Given the high numbers of savers reaching retirement age in the next few years, this is a cause for concern. There remains a need to educate the population on where and how people’s money is being saved and what options are available in retirement.
Retirement is becoming a less fluid concept
Most still see retirement as a gradual process
Just under half of Australians (46%) see retirement as an event with several stages, a decrease from 55% in 2021. As is the case with other countries, younger people (aged 18-34) are more likely to see retirement as a one-off event (38%) than those aged 55+ (20%).
When it comes to financing their retirement, Australians appear just as likely to use their personal savings as they are to rely on their government funded Age Pension (53%). A super fund (retirement fund) is also an expected source of retirement income for 51% of Australians. Younger people (aged 18-34) are more likely to mention super funds (54%) than those aged 45+ (45%), probably due to the introduction of auto enrollment in the early 1990s.
Retirement finance concerns go beyond the basics
Lifestyle options are a cause for worry alongside everyday costs
Being able to afford day-to-day living costs tops the list of Australian respondents’ financial worries when looking ahead to retirement (60%, up from 45% in 2021). This concern is strongest among women (65%, compared to 54% for men) and those nearing retirement, aged 55+ (63%, compared to 52% for those aged 18-34).
Australian respondents are also concerned about living a limited lifestyle in retirement, with 54% worried – a small increase from 51% in 2021.
People want clarity and control
Clear information and a sense of autonomy are important
Australian respondents have an engaged, independent approach to seeking a retirement finance provider. Most important to them is the ability to check their balance online (62%), and their second priority is receiving clear and simple communications (54%).
Flexibility is increasingly important to Australian respondents. Around half (49%) say that having a wide range of investment options is important, a significant increase compared to 37% in 2021.
Among older Australian respondents, the ability to withdraw lump sums if needed is something of a prerequisite: 52% of those aged 55+ select this as important compared to 29% of those aged 18-34.
Nearly a third (30%) of Australian respondents want to manage their retirement finances entirely by themselves. This is driven by those closer to retirement – 43% of those aged 55+ would prefer to manage their finances alone, compared to 23% of those aged 18-34. About half (49%) of Australian respondents would prefer to manage their retirement finances with some assistance.