Point of View: Anxiety overtakes delusion

A SIGNIFICANT cultural shift is underway in our attitudes towards retirement.

Research commissioned by the Association of Superannuation Funds of Australia (ASFA) shows Australians are waking up to the fact that compulsory super isn’t going to provide them with their desired retirement lifestyle, and are considering prolonging their working lives — often reluctantly.

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, in May and June this year. It follows a benchmark study in 2001 that explored similar territory.

Eighty-two per cent said if they discovered their current retirement savings would not be adequate for their desired lifestyle, they would continue in some kind of paid work in retirement. Yet eight in 10 believe it is difficult for retired people to find suitable paid work.

Although the respondents’ average anticipated retirement age has only risen from 58 to 59 in the three years since the original study, it represents an important turnaround.

Another significant shift is that there is now considerably less delusion among the community about whether their savings will be enough. In 2001, one in three were deluded when it came to their actual retirement future — in 2004 this has fallen to one in eight.

However, delusion has been replaced by anxiety as people contemplate the savings gap.

Workers’ perceptions of how much they will need in retirement are unchanged since 2001, at around $30,000 per annum.

But a shift is occurring in the ranks of the retired. The majority of retirees now also say the minimum adequate annual income they need is $30,000. This is a substantial shift from 2001, when almost a quarter of retirees said they could live on $20,000 per annum.

In 2004, only 13 per cent say $20,000 is sufficient.

The golden years are starting to look a little tarnished — one in three retirees confessed to unmet expectations in retirement, an increase on the 2001 result of one in four. The cause appears to be directly linked to financial security, or the lack of it.

Where main forms of retirement savings are concerned, home ownership (89 per cent) and compulsory superannuation (82 per cent) are still the most common ways of preparing for life after work. Yet those relying primarily on those two methods of saving were less likely to feel as well prepared as others.

There is also a conflict, in that 25 per cent cited home ownership as their most important (as opposed to main) form of retirement savings, but only around one in six currently intends to sell the family home as part of their retirement plans. Go figure.

Other main methods of retirement savings were: savings and investment accounts (54 per cent); voluntary contributions to super (52 per cent); shares (47 per cent); investment property (40 per cent); and a new category for 2004, owning their own business (29 per cent).

The perceived adequacy of people’s financial plans was found to be strongly related to current household income and also to relationship status — those who anticipated being single felt less well prepared than those with joint plans for themselves and a partner.

Saving more for retirement remains an essential peg and the most realistic option. The baby boomers are aware of the need to save more, as this research shows. The critical issue is that most people clearly see it as a joint effort between individuals and government.

If the working community is going to take the heat off the age pension by locking away their dollars to provide for their retirement, shouldn’t there be a quid pro quo from government? Of course there should.

Removing the 15 per cent contributions tax on super is one clear strategy to demonstrate this shared responsibility. By reducing or abolishing the tax on super contributions, savings can grow faster, as can the government tax take further down the line as a result of higher balances. Another welcome strategy is a co-contribution from government — if people can find the necessary discretionary income.

I’m relieved the message about adequacy of retirement incomes is getting through. The downside is many of those surveyed are becoming despondent because they don’t know how to bridge the savings gap.

In the run-up to the Federal election, both the Government and Opposition must spell out how they plan to replace Australians’ anxiety and agitation about their post-working lives, with knowledge and security about the way forward on retirement incomes.

The political party that recognises that we (government, individuals and superannuation funds) are in this ageing thing together, and puts forward policies to tackle it, will give themselves an advantage at the polling booths. The ageing population — not party factions — have the numbers this time.

Philippa Smith is chief executive officer of ASFA.