Marian Poirier

Australian investors are regaining confidence in their retirement wealth after the economic impacts of COVID and are more certain about when they can retire, according to the 2022 MFS Global Defined Contribution Survey. 

The annual study, which surveyed over 4,000 people globally, including more than 1,000 who contribute to an Australian superannuation fund, shows that while concerns around retirement adequacy and time frames have abated, they continue to weigh heavily on younger investors. 

More than half (52%) of younger Australians aged under 45 believe they will need to work longer than expected (down from 58% year prior) due to the economic fallout of COVID, and nearly one in three (30%) ‘no longer’ think they’ll be able to retire compared to 21% of over-45s. Anxiety levels have noticeably abated from last year, when 39% of under-45s and 27% of over-45s held this view.

More Australians expect a longer working life with a sharper end

Among those surveyed the expected age of retirement has been revised to 66 years, considerably more than the 60.7 years envisioned last year. This aligns with more people expecting a hard stop in their working life, up to 18% from 13% last year. 

When questioned about their post-retirement intentions, 34% of over-45s said they will seek advice from a financial advisor; 32% will set up an account-based pension with My Super; 25% will begin a transition to retirement income stream with My Super while still working; 22% expect to rely on the age pension partially or fully; and only 16% will take a lump sum. 

Australians are leading in the global push to see more ESG options in retirement plans

Eighty-one percent of Australians want to see ESG investments offered in their retirement plans, up from 74% the year prior and exceeding the interest shown in global markets. Demand for ESG options in plans is also high in the United Stated at 78%. In Canada its 72% and 80% in the United Kingdom.

While the survey globally showed a correlation between age and demand for ESG in all regions, Australian baby boomers (aged 55 to 73) displayed the greatest sentiment change of all ages and regions, with 71% wanting ESG in their super offerings, up from 65% last year.

Regarding the consideration of ESG issues in the allocation of investments, an integration approach was favored by Australians (41%) over an exclusionary approach (38%), with one in five preferring their fund not take ESG into consideration when investing in companies. Forty-nine percent believe their superannuation fund does an adequate job of considering ESG issues when making investment decisions on their behalf; however, just 43% of women agreed with this compared with 54% of men.

Huge shift in sentiment toward advice, especially via superannuation funds

Local investors appear marginally more receptive to receiving advice from an advisor, with 30% receiving formal advice, up from 29%. However, this contrasts sharply with the 52% (up from 32%) of respondents who now point to their superannuation fund as a source of advice. 

Just 9% said they receive ‘no advice’ compared to 24% last year. 61% indicated that they would use an advisor if one was offered by their super fund, up from 48% the year prior. In-person remains the preferred way to receive advice, but investors are increasingly turning to financial publications (15%, up from 7%) and robo-advisors (11%, up from 8%).

Marian Poirier, Senior Managing Director and Head of Australia and New Zealand at MFS Investment Management, commented on the survey findings: ‘Though planning a comfortable retirement with certainty remains difficult, it is encouraging to see confidence and conviction levels return after the destabilising effects of COVID.

‘Investors appear much more receptive to receiving advice as they increasingly assert their investment preferences, and trusted superannuation funds are poised to build out advice models.

‘Our survey once again reinforces the idiosyncratic nature of retirement planning and the inadequacy of the “one size fits all” approach. Confidence around retiring is affected by global and economic events, but it is encouraging to see there is a growing understanding of how to better meet retirement goals.’

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