Small increases in super contributions has a significant impact on retirement peace of mind: Retirement Income Report

King Loong Choi

Leading research firm Investment Trends has released its latest Retirement Income Report, an in-depth study of Australians’ attitudes towards retirement and post-retirement issues.

The report, now in its tenth year, draws on the responses of 5,210 Australian adults.

Key highlights

• Many Australians worry about their retirement prospects, but a small increase in super contributions has a significant impact on peace of mind
• When Australians find relevant, accessible retirement-related information, they are very likely to take steps to improve their retirement outcomes. But finding it is tough

Many Australians worry about their retirement prospects, but a small increase in in super contributions has a significant impact on peace of mind

The latest research from Investment Trends reveals that fewer than half (47%) of working Australians above the age of 40 believe they are prepared for retirement.

For these Australians, a belief they do not voluntarily contribute enough into their super is a key source of their pessimism – nationwide, only a quarter of non-retirees believe they are contributing enough to retire comfortably.

“While many Australians worry about their retirement prospects, there is only a small difference in superannuation contribution levels between those who fear being unable to retire comfortably and those who are positive about their prospects,” said King Loong Choi, Senior Analyst at Investment Trends.

“Australians who believe they will live comfortably in retirement typically contribute 11% of their annual household income into their super fund, meaning that an additional contribution of 1.5% p.a. above the Super Guarantee level (of 9.5%) contributes significantly to their peace of mind. Even among lower income households, a slight increase in super contribution levels corresponds with greater confidence in retirement outcomes,” explained Choi.

“Super funds and retirement product manufacturers can play an important role in encouraging Australians to start thinking about their retirement from an earlier age, and show them how a small increase in their super contributions can make a significant difference.”

When Australians find relevant, accessible retirement-related information, they are very likely to take steps to improve their retirement outcomes. But finding it is tough

Few non-retirees have actively sought and found information pertinent to their financial situation at retirement. In 2019, two in five non-retirees searched for retirement-related information, but among these individuals, only half say they found what they needed.

“Currently, super funds are the most frequent point of contact for those seeking information on retirement, but with only half saying their info needs were sufficiently met, there is room to improve both the accessibility and relevance of content,” said Choi.

“It is crucial that relevant retirement information is easy to find, as those who successfully find the information they need are highly likely to take further action – almost 90% of them. And the actions these people take are important ones, most often preparing a will, seeking financial advice and making voluntary super contributions,” explained Choi.

“Our research also reveals that Australians who were successful in seeking information from their super fund were more likely to engage with their fund, stay with their fund and consolidate other super monies to their fund.”

About the report

The tenth edition of the Retirement Income Report provides a detailed analysis of Australian adults and their attitudes towards retirement and post-retirement issues. This report is based on a large-scale survey of 5,210 Australians over the age of 40, conducted between September and October 2019.