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Asset balance and retirement income mismatch

The latest Financial Services Council (FSC) research into the SMSF sector, co-commissioned with UBS Asset Management, has revealed trustees’ idea of the asset balance they will require to fund a comfortable retirement does not match the level of yearly income they are hoping to draw from their super fund.

The “FSC/UBS Asset Management SMSF Report December 2016” showed half of the SMSF trustees surveyed felt they needed $1 million in their fund for a comfortable retirement, with the median balance required being $800,000.

In relation to the amount of annual income SMSF trustees thought they would need for a comfortable retirement, 32 per cent estimated they would need less than $50,000, while 20 per cent believed they would need $150,000 or more.

The average estimated pension drawdown amount was found to be $97,000 a year and the median was $70,000.

Irrespective of the anticipated income SMSF trustees thought they would need in retirement, the survey found a distinct change in the level of drawdowns in 2016.

According to UBS Asset Management Australia and New Zealand head Bryce Doherty, the statistics suggested there was a serious adequacy issue among retirees still needing to be addressed.

“The amount members have been drawing down on their self-managed super accounts [has] increased quite markedly this year compared to last year,” Doherty said.

“It’s an interesting point to place beside the fact that if we’ve got half of the people in self-managed super thinking that less than $1 million will be enough for them to retire on, that doesn’t match up with the amount that is being drawn down given how long people are going to live.

“Further to that, there were only 20 per cent of people who responded to the survey suggesting that self-managed super would be their only source of income in retirement.

“Now some of these people have investments outside of self-managed super, but if we, and from the point of view of where UBS Asset Management sees super, if we’re thinking that super is really the key to helping people self-fund their own retirement and take the pressure off the taxpayer, if only 20 per cent of people in self-managed super are thinking this is going to be the vehicle that supplies the income in their retirement, then I think we’ve got a bit of a problem.”

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