Industry-wide collaboration necessary to better prepare Australians for aged care costs: Investment Trends 2016 Retirement Income Report

Leading research firm Investment Trends have released its 2016 Retirement Income Report, an in-depth study of Australians’ attitudes towards retirement and postretirement issues. The report is based on a large-scale survey of 6,987 Australians over the age of 40 conducted through September and October 2016.

Key highlights include:

• Australians are growing more concerned about their retirement prospects. Opportunities abound for super funds and financial planners to help
• The current suite of retirement products appeal to only a small segment of Australians
• Industry-wide collaboration is necessary to better prepare Australians for aged care costs

Australians are growing more concerned about their retirement prospects. Opportunities abound for super funds and financial planners to help

New research from Investment Trends reveals only 44% of Australians over the age of 40 feel prepared for retirement, down from 49% in 2015. More alarmingly, 51% of those already retired expect to outlive their retirement savings, up significantly from 33% in 2013.

“Australians’ confidence about their retirement have deteriorated significantly over the past few years,” said Investment Trends Senior Analyst King Loong Choi. “The ability to accumulate sufficient wealth, potential falls in the share market and regulatory changes to the superannuation rules are all contributing to Australians’ growing angst about their retirement future.”

Asked what level of income they would need in retirement, half of working Australians say at least $3,000 per month to have a comfortable lifestyle, yet only one in three currently feel they would be able to achieve this.

Two in three working Australians recognise they need to turn to financial professionals to help them reach their retirement goals. These Australians are most inclined to first turn to either a financial planner or their super fund for this help.

“Super funds and financial planners are best placed to inform, educate and advise Australians on their retirement finances,” said Choi. “While retail funds have been top of mind for Australians’ retirement needs, the concerted effort from industry funds over the last few years in strengthening their retirement proposition has made them serious competitors for Australians’ retirement monies.”

The current suite of retirement products appeal to only a small segment of Australians

Advice and education on the various retirement product options are critical for ensuring Australians allocate their assets wisely when they move into retirement. Retirees who have used a financial planner allocated nearly twice as much of their savings to retirement income products than retirees who have not used a planner. The unadvised, in the meantime, have spent four times more of their retirement nest egg on lifestyle expenditure such as renovations, holidays and new vehicles (car, camper or boats) than planned retirees. Retirement product providers can help further through product innovation. Investment Trends proprietary Point of Failure Analysis reveals allocated pensions and annuities appeal to only 11% of Australians approaching

Retirees who have used a financial planner allocated nearly twice as much of their savings to retirement income products than retirees who have not used a planner. The unadvised, in the meantime, have spent four times more of their retirement nest egg on lifestyle expenditure such as renovations, holidays and new vehicles (car, camper or boats) than planned retirees. Retirement product providers can help further through product innovation. Investment Trends proprietary Point of Failure Analysis reveals allocated pensions and annuities appeal to only 11% of Australians approaching

Retirement product providers can help further through product innovation. Investment Trends proprietary Point of Failure Analysis reveals allocated pensions and annuities appeal to only 11% of Australians approaching retirement, when the drawbacks are considered.

“Opportunities abound for new retirement products and retirement product providers to enter the market,” said Recep Peker, Research Director at Investment Trends. “Retirement product providers looking to go direct, and those looking to distribute through advisers, can gain significant market share by innovating on the products offered and the education that supports them.”

Industry-wide collaboration is necessary to better prepare Australians for aged care costs

The need for aged care and the amount of funds required to cover the cost of aged care has the potential to take many Australians by surprise. Fewer than one in five Australians not yet retired have thought about their aged care needs. “Australians typically do not begin thinking about or planning for their aged care needs until after retirement,” said Choi. “But for many, this may end up being too late for them to make arrangements for potential aged care costs.” Only one in three Australians say they either

“Australians typically do not begin thinking about or planning for their aged care needs until after retirement,” said Choi. “But for many, this may end up being too late for them to make arrangements for potential aged care costs.” Only one in three Australians say they either

Only one in three Australians say they either have, or intend to seek more information on aged care, most often planning to turn to Government services or medical professionals for this. “As an industry, we must address Australians’ lack of engagement on the topic of aged care and better prepare them for potential aged care needs,” said Choi. “This will require further action from super funds, financial advisers and product providers. The Government and medical professionals also have a role to play in growing Australians’ awareness of the financial aspect of aged care, particularly in light of our aging population.”

“As an industry, we must address Australians’ lack of engagement on the topic of aged care and better prepare them for potential aged care needs,” said Choi. “This will require further action from super funds, financial advisers and product providers. The Government and medical professionals also have a role to play in growing Australians’ awareness of the financial aspect of aged care, particularly in light of our aging population.”