The latest survey was conducted during the third quarter of 2023 and revealed that despite a dramatic reversal in markets, many of the measures of confidence appeared to have weakened rather than strengthened among Australian respondents.
Given the focus of the superannuation industry on investment returns, State Street said it was expecting to see a lift in measures of retirement confidence in 2023, however, there was a marked drop in most questions.
The percentage of people who expected they would have enough saved for retirement decreased from 25 per cent in 2022 to 20 per cent in 2023. Those who can’t imagine being financially secure enough to retire dropped from 14 per cent to 10 per cent, while those who are not confident they will be able to retire when they planned rose from 40 per cent to 50 per cent.
When asked what factors most negatively affect their confidence they would be ready to retire when planned, the choices in the top three were inflation and the cost of living crisis (73 per cent), mortgage debt/rent and housing costs (38 per cent), and medical expenses (35 per cent).
The report stated that these three were selected more often than factors like having spare money for savings, the complexity of the superannuation and pension system, and lack of trust in super.
It added that December 2023 saw two significant, and related, developments for retirement incomes in Australia. The first was the government’s release of its final response to the Quality in Advice Review, and the second was Treasury’s release of a discussion and consultation paper on the retirement phase of superannuation.
“These two releases are deliberately linked. It is hard to imagine a robust ecosystem for retirement incomes that doesn’t include affordable and accessible advice,” the report stated.
“This is clearly reflected in the survey responses. When asked how they would like to sustainably withdraw savings in retirement, 40 per cent were comfortable ‘figuring it out myself’ while 37 per cent wanted to work with a financial adviser. Responses that involved more active guidance from the superannuation fund itself were less popular.”
The report’s authors noted that the interaction of the age pension, superannuation, and healthcare makes the Australian superannuation system particularly complex and it is for this reason the retirement ecosystem needs both advice and innovative products from superannuation funds.
In total, just under half the respondents included the age pension in their top three sources of income in retirement, with 29 per cent having the age pension as one of their top two sources.
The biggest concern in planning for retirement was not being able to cover an unexpected expense such as housing or medical costs (34 per cent) while five per cent identified ‘not leaving a bequest’ as their biggest financial planning concern.
“This may be a welcome finding for policymakers and also suggests that chronic under-spending by Australian retirees is not deliberate,” the report noted.
