Treasurer Joe Hockey’s hopes of marshalling an older workforce in the 21st century might be a pipedream, new research suggests.
A survey of 1500 breadwinners aged over 50 found that most older Australians want to work beyond 68, but factors outside their control prevent them.
The survey conducted by investments and retirement consulting company, Mercer, found that most people retire closer to 60 due to redundancy or illness.
Mercer’s managing director David Anderson said the findings revealed a gap between the expectations and the reality of retirement.
“Our research shows uncontrollable triggers can derail the best laid plans for retirement,” he said. “Australians lack longevity defence, which means many of us will simply outlive our savings.”
The research findings indicate that illness and redundancy force around 40 per cent of Australians to retire earlier than they expect, leaving them with insufficient income streams.
“We’re living longer but retiring earlier than we expect, which means more years to fund in retirement and less working years to save for it,” Mr Anderson said. “This disconnect could leave a gaping hole in our hip pockets in our golden years, it just doesn’t add up.”
The Mercer research also found that only 28 per cent of workers over 50 believe they had enough savings to retire when they want.
“It’s likely retirees will outlast their savings by more than five years on average,” Mr Anderson said.
This finding appears to back arguments that workers approaching retirement should be encouraged to take their super as an income stream.
AustralianSuper chief executive Ian Silk wants super funds and their members to refocus their thinking about retirement savings away from lump sum payments.
“As an industry we, and this has been true of AustralianSuper, have focused on lump sum numbers at retirement,” he said.
“We have made lump sum the goal of the system – but the purpose of super is to provide members with an income in retirement.”
Mr Silk said creating a default income stream for super fund accounts would be a constructive step. Under such a system, members of super funds would automatically be eligible for an income stream upon retirement unless they told their fund they wanted a lump sum payment.
“It takes away the reflex action of withdrawing a lump sum from superannuation when it is not necessary, and sometimes not in the member’s best interest,” he said.
The lump sum
David Whiteley, chief executive of Industry Super Australia, said a culture of lump sum payments had developed among retirees where retirement savings were being used to fund things for which they were not intended.
“The culture of the lump sum has meant that people use their payouts to pay down debt,” he said.
The effect was to increase Australians’ reliance on the aged pension at earlier stages of retirement.