Retirement Survey shows inflation has eroded retirement confidence in Australia

Josh Barton

The current inflationary environment has prompted more than half of Australians to rethink their retirement, with potential consequences for Australia’s $3.5 trillion superannuation sector and future workforce, according to the 2023 MFS Global Defined Contribution Survey.

In step with global investors, 59% of Australians surveyed said that inflation had prompted them to change their thinking about retirement in the past 12 months, with 54% opting for a more conservative investment approach. The vast majority (74%), said they would now need to save more than they previously planned, 61% said they would need to work for longer and 40% no longer see themselves as retiring at all. 

The effects of inflation were found to have had a greater impact on retirement confidence than the market events of the past three years, including COVID, with 35% citing the latter as among the reasons for no longer believing they will ever retire.

The 2023 MFS Global Retirement Survey, which interviewed 1,000 Australian superannuants as part of a global survey spanning members of retirement plans across Canada, the United Kingdom and the United States, found that only 26% of local respondents were confident they would be able to retire at the time and age of their choosing.

According to the findings of the survey, the age Australians expect to retire remains unchanged, 66 years, with most (68%) envisioning a more gradual transition in which they reduce hours or switch jobs and some (15%) expecting a hard stop as they cease working for a salary.

Australians want in-person advice and online support for retirement saving and planning

Family and friends remain key to the search for advice, cited by 36% of respondents as a source for advisor introductions. Twenty-eight percent turned to their employers to find an advisor.

In terms of preferred advice delivery, 33% of Australians want in-person or video contact with a human advisor. But online tools such as retirement calculators are popular, cited by 27%, and there is increasing interest in online financial publications, videos, and podcasts. Responses show that pure robo-advice is struggling for traction at 5% while 13% are not interested in any form of advice.

Demand for ESG in investments offered within retirement plans has waned but remains high

Australians are still interested in seeing more ESG investments offered in their retirement plans, though demand has waned to 76% from 81% in 2022. ESG demand continues to be inversely correlated with age, with most demand being driven by millennials, a persisting global trend.

Joshua Barton, Managing Director and Head of Australia and New Zealand, commented on the findings: ‘While the loss of retirement confidence in Australia is in line with global peers, it highlights the role that effective advice can play in helping investors meet their retirement objectives. We need to continue to open pathways to advice across the superannuation system, including through superannuation funds and employers and new technologies to support Australia’s sophisticated yet smaller advice market. This is particularly important as the industry readies for superannuation’s historic transition from savings accumulation to income drawdown; we must embrace the regulatory and legislative relief changes geared towards delivering better financial outcomes that can help insulate retirees, current and future, from market cycle stress.’