Australians short on retirement funds

Senior couple on yacht, man using laptop and woman writing postcardSMALL FILE FOR SIZING ONLY Source: Getty Images

AROUND 60 per cent of Australians admit to being unprepared to stop working and expect to run-out of superannuation and cash savings half-way through their retirement.

A survey of 1000 Australians, conducted by banking giant HSBC, found workers expect to be forced to rely on the government pension when their retirement savings run dry after an average of just 11 years.

And in a worrying development for future government budgets, 56 per cent of Australians have never saved for their retirement outside of their superannuation.

HSBC head of wealth management Graham Heunis said future generation are going to be saddled with huge debts as the country's ageing population heads into retirement.

"People need to start saving earlier otherwise the budget pressure will be huge in 20 years,'' he said.

The most recent research shows the average Australian male has just under $200,000 in superannuation while women have only $112,000. And Australians expect 30 per cent of their retirement income to come from the pension, 20 per cent from superannuation, 14 per cent from cash savings, 11 per cent from property and eight per cent from shares and investments.

Mr Heunis said Australians tended to focus on short-term savings goals, with 53 per cent prioritising on saving for things like a holiday over retirement.

The survey results come amid speculation about possible changes to the superannuation system in the Gillard Government's Budget in May.

The Financial Services Council and the SMSF Owners' Alliance yesterday joined forces to call on the Government and Coalition to guarantee no further tax changes will be made to superannuation.

FSC chief executive John Brogden said the negative impact of tax and other changes to superannuation in recent years has seen a net reduction of $5.4 billion from the system.

"Every time a new tax is threatened, confidence in the system is lost,'' he said. "There have been 10 substantial tax changes to superannuation since 2008. The industry has strongly supported sensible reforms to the system, but we've had enough.''

Mr Brogden said that only Australians who start work from 2019 - when superannuation contributions are 12 per cent and retire 40-50 years later will get the benefits of a lifetime of adequate contributions.

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Australians short on retirement funds

Senior couple on yacht, man using laptop and woman writing postcardSMALL FILE FOR SIZING ONLY Source: Getty Images

AUSTRALIANS expect to survive an average of just 11 years on their retirement savings, including superannuation, before they are forced to rely on a government pension.

A survey of 1000 Australians, conducted by banking giant HSBC, found respondents expected their superannuation to run out, on average, just over halfway through their retirement.

Australians expect 30 per cent of their retirement income to come from the pension, 20 per cent from superannuation, 14 per cent from cash savings, 11 per cent from property and eight per cent from shares and investments.

The survey results come amid speculation about possible changes to the superannuation system in the federal government's budget in May.

HSBC head of retail banking and wealth management Graham Heunis said many were financially unprepared for retirement.

"Whether it is the culturally relaxed Australian attitude towards saving, our high cost of living, or an expectation that our super and pension will cover us in retirement, the reality is many Australians are at risk of getting caught very short, financially, towards the end of their life," he said.

"Australians believe they can live a more modest life in retirement. However, this attitude fails to take into account how they will cope with the likely increase in the health and aged care costs of a frail retirement."

Mr Heunis said Australians tended to focus on short-term savings goals, with 53 per cent prioritising on saving for things like a holiday over retirement.

But, he said, younger Australians expected to be less reliant than those currently closer to retirement.

Respondents aged between 45 and 54 expect 45 per cent of their retirement income to come from the pension, while those aged between 25 and 34 expected the pension to account for just 19 per cent of their income.

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Super funds grab a third of your savings

On average Australians pay $2000 in super fund fees per year. Picture: File Source: Supplied

SUPERANNUATION fund fees grab up to a third of your savings over your working life, new analysis shows.

On average Australians pay $2000 in fees per year, research commissioned by ING Direct has found.

The analysis, conducted by Rainmaker, shows that depending on your fund, worst case scenario means the superannuation fees will eat away one third of your savings, but in the best case scenario fees will still take one fifth of your money over your career.

A person who commences work aged 20 on a starting salary of $25,000 is likely to accumulate between $502,000 and $663,000 depending on the fee structure of their super fund, the research found.

But they are expected to pay between $118,000 and $174,000 in total fees.

ING DIRECT head of superannuation Michael Christofides said Australians were getting ripped off by fees that are unnecessarily big.

"Many super funds charging an exorbitant amount," Mr Christofides said.

"Unfortunately many Australians don’t take enough of an interest in their super - most people don't know what their balance is – and a lot of people don't know how much fees they pay."

Once you retire, super fund fees get exponentially higher, because your super balance increases over your career.

ING Direct found over 65s are slugged the highest in fees, paying $6130 a year on average.

People under 35 pay an average annual fee of $445, a figure that jumps up to $1239 for people aged 35-49, $3262 for people aged 50-59 and $3682 for people aged 60-65.

The analysis found that someone who retires with $500,000 would pay up to one fifth of their cumulative benefits in fees over the 35 years their super is expected to last.

Over the 35 years the member will receive an estimated $1.2 million in cumulative benefit payments, but they will pay an estimated $230,000 in cumulative fees which is equivalent to 19 per cent of their cumulative benefits.

These retirement cumulative fees are almost twice the total fees during the pre-retirement accumulation phase.

Association of Superannuation Funds of Australia CEO Pauline Vamos said: "Research published by the consultancy Rice Warner indicates that there are a large number of superannuation funds open to the public with fees which are both well below 1 per cent of assets and the average fee estimates used in the ING analysis.

"ASFA encourages individuals to actively engage with their superannuation and to choose the superannuation fund and investment option that delivers the best value for them in terms of prospective investment returns, services, advice and net fees."

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