Challenger Survey Finds only 40% of super fund members expect a comfortable lifestyle in retirement


Aaron Minney

Only 40 per cent of Australia’s superannuation fund members expect to have a comfortable or better lifestyle in retirement, according to a survey of over 3,000 super fund members aged over 45, commissioned by Challenger Life.

The survey of superannuation fund members revealed that older people were more likely to expect comfort in retirement, at 46 per cent compared to only 35 per cent of respondents aged under 55. The majority (54 per cent) of those already retired considered their lifestyle to be comfortable.

Challenger’s Head of Retirement Income Research, Aaron Minney said the disparity could partially be explained by older people having more savings while younger savers had yet to see the fruits of compounding returns. The survey also showed the typical super fund member did not think about retirement risks in the same way as superannuation professionals, Mr Minney said.

“Many members did not know what longevity risk [outliving their retirement nest egg] means and importantly how it can be managed. There is this one-sided concern that they might outlive their savings rather than also thinking about solutions that can provide secure lifetime income.

“There were also some clear distinctions across groups that reported higher levels of concern. Aside from the obvious, that people with less savings are more worried about their finances in retirement, the survey also highlighted that; women, people under 65 and those expecting a basic lifestyle are more likely to be concerned about outliving their retirement savings.”

When asked about their ‘plan B’, the majority of respondents (57 per cent) said they would adjust their lifestyle by changing their spending habits to manage the risk of running out of money. The survey confirmed that people with a financial plan (whether formal or not) tended to have lower concerns. 39 per cent of people with a plan were not concerned about outliving their savings, compared to only 17 per cent of those without a plan.

Nearly half (47 per cent) indicated they had a mental plan, whilst only 13 per cent said they had a formal plan. People over 70 were twice as likely to have a financial plan.

When asked about a product which provided a guaranteed lifetime income stream as well as regular payments that might move with market performance, 67 per cent said this would be an appealing product.

Mr Minney said that while superannuation funds will need to gather their own insights on their members, this research was a useful starting point in understanding how fund members feel about their retirement income planning.

“This survey shows that super fund members have an interest in solutions that balance their risks in retirement, which really speaks to the purpose of the Retirement Income Covenant. It’s really clear that the majority of members are concerned about outliving their savings so it will be important for funds to find solutions that will help overcome this concern, support members with plans that help them understand retirement risks, and ultimately lead to better financial outcomes for their members.”

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