Retirement stress underpins need for advice

While Australia continues to rank strongly in the global retirement index, financial advisers are still vital to mitigating the financial strain being felt by retirees.

Natixis Investment Managers’ annual global retirement index (GRI), created with CoreData, assesses factors that drive retirement security across 44 countries.

This is measured using 18 performance indicators across four thematic subindices: health, finances in retirement, quality of life, and material wellbeing.

It revealed that Australia has ranked seventh for the second year in a row, with the same overall score (78 per cent) as 2023, though down from fifth place in 2022.

Switzerland took the top position with a score of 82 per cent, followed by Norway (81 per cent), Iceland (81 per cent), Ireland (80 per cent), Netherlands (79 per cent), and Luxembourg (78 per cent).

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Looking at the specific finances in retirement subindex, Australia came in third behind Ireland and Switzerland.

Despite Australia’s strong performance in the retirement space, Natixis recognised that many Australians are still feeling financial strain in retirement.

It found that 62 per cent of Australians aged 70 and over do not have any superannuation at all and another 47 per cent said it will “take a miracle” for them to securely retire.

Moreover, 40 per cent of retirees are underspending their retirement savings due to the fear of running out and longevity risk, underscoring the importance of financial advice during this stage of life.

“Despite the strengths of our retirement system, many Australians find managing their retirement to be a daunting task, and that’s likely due to the limited access to financial advice,” commented Louise Watson, country head for Australia and New Zealand at Natixis.

“Some Australians have access to a financial adviser but not all; if we are to close the retirement savings gap, advice needs to be affordable and easily accessible to all Australians.”

Watson emphasised the need for greater financial literacy and equitable retirement solutions to drive retirement confidence.

“Providing quality advice and diversified options tailored to today’s uncertain economic environment is crucial in preventing a future retirement crisis,” she added.

Natixis’ report identified the ongoing advice gap in the Australian market, which remains a “significant challenge” and leaves retirees vulnerable to the challenges of longevity risk.

With the Delivering Better Financial Outcomes reforms underway and tranche two set to introduce “qualified advisers” that can provide basic advice, the report said this could improve the affordability and accessibility of seeing an adviser.

“The reforms aim to address the industry’s talent shortage by creating new entry pathways and fostering future professionals through structured career progression,” the report said.

“This will ensure there are enough skilled advisers to provide comprehensive financial guidance to the growing population of pre- and post-retirees, better meeting the financial needs of Australians.”

Last year, Natixis also found that Australians are retiring at 65, later than the global median retirement age of 61.

At the time, Watson said: “It is concerning that we are retiring later than other countries. This really shows how important it is for us to make our investments work as hard as possible while we are employed and well into retirement.”