Australians unprepared for retirement

Almost one third of Australians have made very little preparation for their retirement a new survey has found.

According to the Mercer financial literacy survey, 30 per cent of respondents have made little preparation for retirement, while 33 per cent have given it some thought, but admit they have done little in preparation for retirement.

Only 1 per cent of those surveyed thought they had done enough to create sufficient wealth to sustain their retirement.

At the other end of the scale, 20 per cent said they had done nothing towards retirement planning.

Mercer chief executive Peter Promnitz said Australians aren’t prepared for retirement, and part of that problem is they don’t understand superannuation and its various terms.

“Financial literacy became a crucial issue three years ago when superannuation fund choice was introduced,” he said.

“But people are not making informed choices about their superannuation because they don’t understand it, so they are making uninformed decisions, which are a dangerous thing.”

Mercer quizzed respondents in the survey on how much they knew about superannuation.

The 11 questions focussed on areas such as contributions, investments and retirement payments.

Only 3 per cent of respondents got all questions right, while a further 10 per cent got eight questions right out of the total.

The bulk of respondents (30 per cent) got five out of the 11 questions right, while 14 per cent didn’t get any questions right.

However, the good news for financial planners was the majority of those surveyed said they would seek advice before making any financial decisions.

The survey found 67 per cent of respondents would “prefer to seek guidance on financial matters”, while 19 per cent said they would allow an adviser to make the recommendations for them.

The preferred source of advice was through a financial planner or accountant (63 per cent of respondents), while 50 per cent would talk to family and friends.

In light of the push for financial literacy, only 24 per cent said they would attend a seminar on financial matters.

Promnitz said Mercer would now conduct the survey every two years to see how Australians are responding to making decisions on planning for retirement.

“The survey is an opportunity for government and employers to look at owning financial literacy,” he said.

“At Mercer, we intend to use the information [from the survey] to clearly influence how we engage with our clients about financial literacy.”