Recent analysis into the country’s retirement savings system has shown Australians are struggling with the complexity of the framework.
The latest research into the Australian superannuation system has found individuals are finding it too complex, leading them to feel stressed about their retirement years and lacking confidence as to how to spend their savings once they have ceased working.
More specifically, the Grattan Institute report, “Simpler Super: Taking the stress out of retirement”, indicated around 80 per cent of Australians found retirement planning complicated and 60 per cent expected retirement itself to be financially stressful.
The data drew on research from a survey conducted by Choice, the ABS Survey of Income and Housing, and National Seniors Australia.
It led the independent research house to categorise most retirees are net savers as they do not draw down on their superannuation as intended, resulting in their fund benefits growing for decades after concluding their employment years.
Grattan Institute housing and economic security program director and report author Brendan Coates labelled the situation as one turning the compulsory superannuation scheme into a massive inheritance scheme.
“This is not how it was meant to be. Too few retirees are enjoying the benefits of the savings they built up during their working lives,” Coates explained.
The study found guidance offered to Australians as to how they use their superannuation savings was sparse and in the main unhelpful.
It revealed over four out of five people are being directed toward employing an account-based pension in retirement, which in turn has led them to withdraw only the legislated yearly minimum.
According to the think tank, current circumstances have resulted in 65 per cent of super balances left unspent by average life expectancy.
As a result of the analysis, the Grattan Institute made three recommendations it believes would address this issue.
The first is for the government to provide a lifetime annuity and in doing so encourage retirees to allocate 80 per cent of their savings above $250,000 to it. It is predicted this action would increase retirees’ income by up to 25 per cent.
The second is for the government to establish a top 10 list of the best-performing public offer super funds and direct Australians to these offerings. A part of this recommendation is for the Australian Prudential Regulation Authority to performance test all account-based pensions – a move predicted to boost retirement incomes generated from these structure by $75,000 over an individual’s retirement.
Finally, the research house called on the government to set up a free guidance service for retirees that would also advise on eligibility for the age pension. It forecast the service would cost $360 million over its first four years and proposed the amount to be funded by a levy on all superannuation accounts.
“The Grattan Institute blueprint for better old age in Australia would let retirees stress less, spend more and truly enjoy their retirement years,” Coates said.