Debt outstripping superannuation balances

property retirement chief executive director

9 October 2012
| By Staff |
image
image
expand image

A study commissioned by CPA Australia has pointed to the fact that household debt levels are outstripping superannuation balances for those approaching retirement.

An analysis of Household, Income and Labour Dynamics in Australia (HILDA) data by KELLYresearch director professor Simon Kelly found that property debt grew by 94 per cent between 2002 and 2010 and 'other debt' was up by 50 per cent.

In the same period, superannuation balances for the 50-64 year age group only grew by 48 per cent.

"The increase in property prices has provided many with the opportunity to increase their debt and use it to assist others or sometimes to live a life beyond their means," said the study.

As a result, some Australian retirees are likely to have a mortgage to pay off in their retirement, which will impact their quality of life, according to the study.

"This will even further reduce the chance of them having enough savings to meet their expectations and increase the likelihood of them relying on the age pension for their retirement income," said the study.

In addition, the study suggested that the knowledge that there will soon be a lump sum available makes people more willing to take risks prior to retirement.

"It seems that as people are approaching retirement they are using the equity in the family home as a source of funds to assist their children into homeownership, to take an overseas trip, retire early or simply to enjoy a lifestyle their income cannot support," said the report.

CPA Australia chief executive Alex Malley said it was time the industry considered compulsory income streams in retirement, and moved away from the "lump sum as windfall" mentality.

"The system appears to be failing on a number of key aspects, adversely affecting those on lower-incomes as well as encouraging higher risk and higher geared investment behaviour among those on higher incomes," said Malley.

"It is time for leaders of every stripe to set aside the standard vested interest arguments and seriously consider how the system could be rebuilt for optimum result - this includes leaders in politics, business, unions and the funds industry," he said.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

This verdict highlights something deeply wrong and rotten at the heart of the FSCP. We are witnessing a heavy-handed, op...

1 day 14 hours ago

Interesting. Would be good to know the details of the StrategyOne deal....

5 days 20 hours ago

It’s astonishing to see the FAAA now pushing for more advisers by courting "career changers" and international recruits,...

3 weeks 3 days ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

2 weeks 5 days ago

A former Brisbane financial adviser has been charged with 26 counts of dishonest conduct regarding a failure to disclose he would receive substantial commission payments ...

4 days 18 hours ago

Pinnacle Investment Management has announced it will acquire strategic interests in two international fund managers for $142 million....

3 days 21 hours ago