Irene Guiamatsia

Two years on from the Retirement Income Covenant coming into force, research from leading financial insights firm Investment Trends highlights the stark disconnect between the income sources pre-retirees expect to rely on and the reality faced by those already in retirement.

As Australia – and the rest of the world – prepares for retiring baby boomers, the findings highlight the vital pillar our superannuation system is to supporting members in preparing for retirement.

The research reveals that pre-retirees expect their superannuation savings will contribute on average 30% of their retirement funding. The spouse/partner’s super is expected to account for 16% and household savings and investments expected to play a substantial role, contributing 25%.

The reality for retirees bears one similarity and several differences to those expectations. The contribution of their own superannuation is the only estimate pre-retirees get right – 29% of retirees’ income comes from this.

Retirees, however, find themselves relying more on social security entitlements (23% of retirement income) —a source many pre-retirees significantly underestimate.

“There’s a clear gap between expectation and reality, on a few levels,” said Irene Guiamatsia, Head of Research at Investment Trends. “Whether it’s the actual income required, the mix of funding sources to generate that income (chart shown) or even the preferred retirement lifestyle itself. But superannuation is the unwavering pillar members know they can rest on as they transition to the reality of retirement.”

Guiamatsia suggests super funds have the opportunity to take a more active role in equipping pre-retirees with the knowledge they need to be better prepared for the reality that awaits by, for example, providing information on how superannuation interacts with social security.

“This is about empowering members to make better choices and take control of their future. Understanding how different income sources come into play can help pre-retirees to take action now to maximise their retirement income in the future,” concluded Guiamatsia. 

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