Provided by Mercer: 31/7/08
Australians severely under-estimate the link between share market movements, their superannuation returns, and retirement income according to a survey released today by global consulting, outsourcing, and investment firm, Mercer.
Mercer’s Super Sentiment Index revealed that 72 per cent of people surveyed in June 2008 expect their superannuation balance to be higher on their next statement.
Twenty per cent of these think it will be much higher, indicating a large proportion of Australians simply do not understand the impact of recent global share market declines on their ability to retire comfortably at a time of their choice - or at all!
David Anderson, Asia Pacific leader of Mercer’s outsourcing business, said many Australians have not connected the dots between share market performance and their superannuation savings and most have not done sufficient planning for retirement. This will be costly leading up to and during retirement, potentially forcing them to work for much longer than they may have planned or forcing them back to work in later years.
“The ASX200 performance dropped 13.4 per cent in the year ending 30 June 2008 and has dropped 15.9 per cent in the first six months of 2008. There is clearly a wake up call about to sound for many Australians – around half of which say they’re relying on their super to finance a comfortable lifestyle in retirement,” he said.
”People shouldn’t panic in the face of adverse short term performance. However, there is an alarming level of disengagement from super if Australians think there is no relationship between stock market volatility and their super account balance.”
“It’s important to remember investment markets move in cycles and people shouldn’t react to the most recent turbulent period but they really should be expecting a negative impact on their super savings.
“All is far from lost, though. Superannuation for most people is about long term investment with sustained contributions and investment performance over time to accumulate the largest possible retirement nest egg. Superannuation funds have experienced record levels of growth in the last five years which means super members are generally still way in front of most other investments,” Mr Anderson said.
Nearly two in five people surveyed by Mercer believe that investment market movements have ‘no’ or ‘minimal’ impact on their super. Nearly half (46 per cent) have made little or no preparation for retirement, nearly one in three (29 per cent) are unsure of their investment strategy, and 50 per cent are not sure of the benefit structure of their super fund, be it defined benefit or accumulation.
“These numbers are sobering for individuals, employers, superannuation funds and the Government.
“Nearly two in five Australians are not effectively planning to have enough superannuation savings to retire on - the ‘she’ll be right’ Aussie attitude could be very costly for our country in this case.
“Saving for retirement is about sustained commitment – not knee-jerk reactions to market volatility. But people should be made aware the current 9% Superannuation Guarantee contribution will simply not be enough for many Australians to retire in comfort, let alone be self reliant,” said Mr Anderson.
According to Mercer the results could be just the tip of the iceberg in terms of how apathetic the Australian public are about their superannuation – particularly younger Australians.
“The Government has committed to making superannuation and financial advice simpler and more accessible. The challenge now, for both the Government and the superannuation industry, is the generational challenge – how to connect with younger Australians and positively influence their retirement savings habits and preparation,” said Mr Anderson.
Key findings of Mercer's Super Sentiment Index:
- 1,000 people surveyed in June 2008
- 46% have made little or no preparation for retirement
- 71% of people aged 20-34 years have given little, to no, thought about retirement
- 27% - more than 1 in 4 – of people aged 50+ have given little, to no, thought about
retirement - 1 in 4 anticipate being a lot less comfortable in retirement
- 72% expect their superannuation balance to be higher on their next statement
- 19% believe their super balance will be much higher on their next statement!
- 57% are either not worried at all or only a little worried about the impact of share market
performance on their super savings - 48% rank superannuation as their major source of retirement funding – increase of 5% since 2006
- Only 14% of people aged 20-34 invested their super in high growth funds – despite this
being a generally accepted investment strategy for this age group - 54% of people aged 20-34 ranked investments that provide the highest possible returns as
the most important selection factor - Approximately 20% had no, or minimal, interest in super
For more information, contact:
Libby Woolnough
Mercer
Phone: (03) 9623 5361
This information has been prepared by Mercer (Australia) Pty Ltd ABN 32 005 315 917 for general information only. The information does not take into account your personal objectives, financial situation or needs. Therefore, you should not act on this information if you have not considered the appropriateness of this information to your personal objectives, financial situation and needs. You should consult a licensed or appropriately authorised financial adviser before making any investment decision.
