Australians are hearing - but not heeding - the message to save for their retirement
Four out of 10 Australians are not confident they will have adequate savings to fund their retirement, according to the findings of CPA Australias fifth annual Confidence in Corporate Reporting Survey.
The number rises to six out of 10 for women aged 41-55 years, although surprisingly, 67 per cent of both women and men in the 56-plus group are confident they do have enough to retire on.
The survey also confirms that most Australians (65 per cent) accept that they are largely responsible for safeguarding their own retirement savings.
According to CPA Australia CEO Geoff Rankin, the survey findings emphasise a range of challenges many Australians face, and raises some wider issues for the Australian economy.
These results challenge suggestions that many Australians have their heads in the sand and are unaware of the need to save for their retirement, said Mr Rankin. Instead it suggests that many know they need to save, but with current competing financial demands, they simply cant find the funds to direct to their retirement savings.
CPA Australia believes ongoing efforts to build financial literacy should translate into improved personal financial management, and may help people to direct more funds to their retirement nest egg. However, it understands that this will take time.
Financial literacy will be helped by the relatively high readership of superannuation fund reports, with 85 per cent indicating they read them in some way. However, while 51 per cent believe fund annual reports are too complex to be useful, only 34 per cent dismiss them as just company marketing.
CPA Australia believes that efforts should be placed in increasing general financial literacy, said Mr Rankin, and efforts should be placed on reducing the complexity of super superannuation fund annual reports so that the public can make more informed choices about where their retirement savings are going.
Sources of retirement savings
The survey also asked Australians to indicate the types of investments they expect to use to fund their retirement, and which would be their primary source.
Two thirds (67 per cent) of the public expect to have compulsory superannuation, with 34 per cent expecting it to be their primary source of retirement funding. Just over half (54 per cent) have voluntary superannuation, and of these 21 per cent expect it to be their primary source. In contrast, finance professionals expect 74 per cent of their clients to rely on either forms of superannuation as their primary source of retirement funds.
The compulsory superannuation guarantee will not provide adequate funds for most Australians, so its essential people supplement these savings with more voluntary super, or have other investments, said Mr Rankin.
These survey findings suggest that significantly fewer Australians hold other forms of investments. They also may indicate that a further as yet unquantified group of Australians currently believe they have adequate savings, but may discover thats not the case once they retire, he added.
While superannuation was the most commonly cited source of retirement funding, 32 per cent expect to have managed funds, 23 per cent will have direct shares, 24 per cent expect to sell or downsize their family home, 13 per cent to have property investments, and 12 per cent expect to sell a business to boost their retirement funds.
Reverse mortgages (releasing equity in the home) were identified as a source of retirement funding by 14 per cent of the public. Given that reverse mortgages have really only become available in the past few years, they have certainly had an impact on the retirement planning of many Australians, said Mr Rankin.
Safeguarding retirement savings - whose job is it?
The long term security of Australians retirement savings is clearly important. The survey asked the respondents to indicate to what degree superannuation funds, regulators, financial planners, employers, and individuals were responsible for safeguarding their retirement savings.
Nearly nine out of 10 Australians agreed that they were responsible to a large (68 per cent) or to some (21 per cent) degree. However, 82 per cent also put the onus on super funds, saying that the funds were also responsible to a large or some degree for individuals retirement savings.
Interestingly, 60 per cent of financial advisers believe that they are largely responsible for safeguarding their clients retirement savings, whereas only 26 per cent of the public agree, and 28 per cent believe that financial planners carry no responsibility at all. Its an interesting outcome that probably reflects the professionalism of todays financial planners, Mr Rankin added.
The Confidence in Corporate Reporting Survey 2006 provides a further important perspective to the wider range of work CPA Australia is undertaking in the broad areas of financial reporting, superannuation, financial planning, and sustainability.
The survey provides an illuminating snapshot of the Australian publics thinking on some extremely challenging social and economic issues for business, government, and the Australian community in general, said Mr Rankin.
