Recent research commissioned by financial services firm AMP has shown a majority of Australian retirees are encountering difficulties in understanding and navigating the current retirement system, while also lacking critical knowledge about funding their retirements.
“This research shows the challenges faced by the growing number of Australians heading into retirement, a process they find complex and made harder by a lack of financial literacy,” AMP chief executive Alexis George said.
“A staggering three in four older Australians are struggling with the complexity of managing their finances for retirement, with more than 40 per cent having no idea if they’ll be eligible for the age pension or not. Seven out of 10 older Australians also don’t know what an account-based pension is, even though it is the main income-generating option for Australians in retirement.
“Lifting levels of financial literacy when it comes to retirement is a critical challenge for Australia and one the government and industry needs to collectively address.”
The research also revealed over 60 per cent of those surveyed wished they had started planning for retirement sooner in life and were ‘extremely concerned’ about the rising cost of living, while almost three-quarters of respondents had never sought financial advice for retirement planning.
AMP general manager of retirement solutions Ben Hillier noted this lack of confidence in managing retirement lifestyles is influencing retirees’ behaviour, leading many to cut back on expenses due to the rising costs of living and not having a sufficient amount of funds in their superannuation accounts.
“This research highlights a knowledge gap when it comes to retirement, but we also know that traditional retirement solutions have some inadequacies. They either expose people to the fear of running out of money in retirement or they provide levels of income which are too low,” Hillier said.
“The combined effect is that retirees lack the financial confidence to spend in retirement and are living more frugally than they need to.”
Market research company Dynata conducted the survey on behalf of AMP last month, polling more than 1000 individuals aged 50 and above to gauge their attitudes on the Australian retirement system.