Safety-net and nudges needed: Retirement system failing retirees, new research shows

Super Consumers Australia has today released research revealing the majority of Australians want to engage with their finances but are unsupported by the retirement system as they transition to retirement.

The nationally representative research revealed three distinct cohorts of retirement thinkers:

• The disengaged (38%): Not that interested in their finances and tend to rely on default options,
• The engaged DIYs (37%): Engaged with their finances but want to make decisions and require quality, independent information and nudges,
• The engaged delegators (25%): Engaged with their finances but look to financial advisers or default options to guide decisions.

“Through the research, it became clear that people are not currently supported to effectively manage their superannuation when they retire.

“We do a lot more to support people during their working lives to find the best products for their super with quality filters and comparable independent guidance about the quality of products. We need to give the same assistance to people planning for retirement,” says Super Consumers Director Xavier O’Halloran.

“Without help people are finding themselves in underperforming products that they can’t compare and don’t give them confidence to spend for fear they’ll run out of savings,” says O’Halloran.

The research follows the recent Retirement Income Review finding that in the face of complexity, Australians disengage or resort to rules of thumb and defaults that are not fit for purpose.

“56% of the pre-retiree survey respondents felt retirement planning will be moderately to extremely complicated. That is too many Australians.”

“Treasury’s current Retirement Income Covenant consultation is an opportunity for industry, government and consumer groups to solve this problem. Different groups of Australians require different tailored nudges and solutions to help them achieve the retirement they desire.”

“We don’t want to repeat the mistakes of the past, where safe, simple products had to be legislated to clean up a market cluttered with thousands of complex products that people could not understand or compare.”

The research was done in collaboration with research firm Fiftyfive5, Super Consumers Australia surveyed 1,500 Australians aged 45 to 80 on how they plan for their retirement, and how this compares to the reality of retirement.