Finance Your Super Superannuation balances are growing more quickly than housing despite boom

Superannuation balances are growing more quickly than housing despite boom

Retirement delays
The recommendations aim to reform Australia's $2.8-trillion superannuation sector. Photo: Getty
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Superannuation investments have outperformed the country’s housing boom, according to new research from Roy Morgan.

But there are still several factors making Australians delay their retirement.

From changes in the federal political leadership to uncertainty in the real estate and stock markets, experts say many people are choosing to stay employed for longer.

Roy Morgan’s research house examined the situations of the 426,000 people expecting to retire in the next year and found they had an average wealth level of $331,000 and superannuation made up 69 per cent, or $228,000, of that. Other investments totalled an average of $103,000.

Ten years ago super made up 53 per cent of the investment balance of those on the cusp of retirement, while non-super holdings made up 47 per cent.

Interestingly those other investments – which include things like investment property and shares along with jewellery, cars and art – totalled on average $111,000, which is slightly higher than the figure today.

Those figures don’t include owner-occupied housing, which was on average the largest investment for those lucky enough to have their own house. Ten years ago the average home value for home-owners planning an imminent retirement was $533,000, compared with $850,000 today,

While that is a hefty rise, in percentage terms it equates to a 58 per cent rise compared with the 80 per cent jump in the value of superannuation accounts over 10 years. Other investments, meanwhile, have declined 7.3 per cent in absolute value in that time.

Roy Morgan industry research head Norman Morris said that while 81 per cent of upcoming retirees were home owners a decade ago, the figure was likely to have fallen somewhat in recent times as home values increased.

That rapid growth in the value of superannuation assets was likely to continue in coming years as the super system matured, according to Ian Yates, CEO of aged lobby group COTA.

“Super is starting to do its job,” Mr Yates said.

Putting off retirement

Having said that, the position is still far better for men than women, with official figures showing women in the 60-to-64-year age group have $157,050 in super – only 58 per cent of the average male balance of $270,710. The figures differ from Roy Morgan’s because they cover a wider age group and don’t just include those within a year of retirement.

Recent falls in the housing and share markets are likely to dissuade some of those planning to retire in the next year from actually making the move, Mr Morris said.

“Declining real estate and stock market values have the potential to delay retirement and encourage people to keep their jobs longer,” he said.

Uncertainty created by Labor’s plans to cut back negative gearing, halve the capital gains tax discount and end the cashing-out of dividend imputation credits may further persuade people to put off retirement in the year ahead, he said.

Wayne Strandquist, acting national president of the Association of Independent Retirees, agreed that weakening markets may frighten people into working for longer.

“If you’ve kept yourself fully invested in growth assets and were planning to retire in six months you might decide to keep working,” Mr Strandquist said.

Mr Yates said during the global financial crisis, many people had put off retirement for two or three years.

“The current environment will have made some more cautious because more people are aware of the effects of weaker markets,” Mr Yates said.

Mr Morris added that while retirement balances were growing, they were still generally inadequate for self-funded retirement.

“Intending retirees will be relying on government benefits for some time yet, given the fact that the Association of Superannuation Funds of Australia estimates that an individual would need $545,000 and a couple $640,000 for a ‘comfortable lifestyle’,” Mr Morris said.

“Given the very low interest rate at the moment and the level of economic uncertainty, the amount required to fund retirement is likely to rise well above these levels. This is not only likely to negatively impact the proportion that become ‘self-funded’ retirees but has the potential to delay retirement decisions.”

The New Daily is owned by Industry Super Holdings.

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