Provided by Mercer: 24/3/10
Australians are feeling more optimistic about the future of the economy, but sharemarket volatility has affected confidence in superannuation.
Mercer’s Superannuation Sentiment Index revealed the majority of Australians (58 per cent) said they were very or fairly optimistic the economy will improve following recent sharemarket gains. Yet concurrently, the global financial crisis is still impairing sentiment towards superannuation, which declined further in December 2009 to a rating of 37 out of a possible 100 (compared to a 42 rating the year earlier), showing that sentiment towards superannuation lags sharemarket performance.
Download Mercer's December 2009 Superannuation Sentiment Index report
Ms Heather Dawson, Partner at Mercer said, “Despite a more positive outlook for the future, the experience of the last two years has not been forgotten by Australians, many of whom are still dealing with the impact of the global financial crisis on their personal finances and superannuation balances.”
Mercer’s study also revealed Australians’ trust in superannuation has declined with only 41 per cent rating their superannuation fund as trustworthy, down from 44 per cent in June 2009 and 52 per cent in December 2008.
“The superannuation industry has reached a crossroad: we have a responsibility to challenge ourselves in the way we engage with members in order to address these fundamental trust issues, ease the fear of market uncertainty and ensure that members have confidence that their superannuation will remain a vital component of their retirement planning.”
Recent economic events have dampened Australians’ trust in superannuation, as people realise they are not as prepared for retirement as they once thought and face the possibility of being significantly less comfortable in their later years than they are now. Only 11 per cent of working Australians feel they are thoroughly prepared for retirement.
“The industry also has an opportunity at this time, to make good some of the shortfalls in the system that have been exposed over the past few years. This again can be as fundamental as reshaping the means in which we communicate, through to structural changes to investment defaults to help improve member outcomes in retirement, in particular considering whole-of-life investment options as a way to improve long-term financial well-being ” Ms Dawson continued.
The study showed that while the majority of working Australians expect superannuation to be the dominant source of funding for their retirement, 3 in 5 expect to be less comfortable in retirement than they are now.
Yet people are keen to learn more. 17 per cent of working Australians rated their current knowledge of superannuation as strong or sophisticated, while the majority (55 per cent) aspired to that level.
“Accordingly, industry, government and superannuation funds have an important role to play in educating working Australians about how to get the most out of their superannuation, and improving access to education and advice services to facilitate early retirement planning,” said Ms Dawson.
Mercer’s Superannuation Sentiment Index is based on an online survey of 1,033 full time working Australians aged 25-65 years, and was conducted in December 2009. The research has been conducted every six months since June 2008. The latest research is designed to gauge Australians’ changing attitudes towards superannuation and retirement post the global financial crisis, and in an environment of intense scrutiny on superannuation funds.
Key findings
- Despite recent healthy sharemarket performance, 56 per cent of working Australians remain fairly, very or extremely worried about the impact of sharemarket volatility on their superannuation account balances
- However, 63 per cent anticipate their superannuation balance will be higher than the last one received, compared to only 34 per cent anticipating this in June 2009
- Working Australians listed their top concerns about super as: loss in value, not having enough funds for retirement and low growth and returns
- Investments that provide the highest possible return remain a priority factor for working Australians, when considering superannuation investment options
“Whilst acknowledging the importance of superannuation, in a post GFC context Australians’ confidence in the system is low. By improving their understanding of how superannuation works and creating a better safety net for retirement, the super industry can play an important role in restoring Australians trust in superannuation,” said Ms Dawson.
More information
Download Mercer's December 2009 Superannuation Sentiment Index report
mercerwealthsolutions.com.au/supersentiment
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.
