The report titled 'The evolution of retirement income: A 2022 snapshot' released by National Seniors Australia and Challenger Limited, was based on a survey of 3,345 people.
It found found that:
- 75% of retirees surveyed are satisfied with their financial security
- 85% of people had accumulated super for their retirement but this proportion was lower for women (82%) compared to men (88%)
- Around half of those surveyed wanted to preserve some of their retirement capital but spend some of it to fund their retirement
- The intention to maintain most or all of capital was significantly more likely for men or those who wanted to help family or a friend to access aged care
- The most common reason for maintaining retirement capital was for medical and health needs
- While 81% owned their own home and 11% owned a home with a mortgage, just 2% used the equity of their home in retirement
- Two-thirds said it was somewhat or very important to leave the home as a bequest
John McCallum , CEO and Director of Research at National Seniors Professor, said older Australians admitted that the compulsory super system had allowed them to enjoy a comfortable retirement.
"The report shows us 90% of retirees have used super as their main source for accumulating retirement capital," Professor McCallum said.
"In short compulsory super delivers what it was designed for, to provide retirees with an income that maintains their working life standard of living.
"Retirees increasingly need to understand that their retirement savings are not so much a nest egg, but a means of achieving the best standard of living possible during their retirement years."
Challenger Limited's Head of Retirement Income Research Aaron Minney agreed that super had been a major success in preparing Australian's for their retirement.
However, he noted that despite the lifestyle improvements it could bring, retirees are reluctant to increase their super drawdown.
"Many retirees cut back on their lifestyle rather than spending their savings for the purpose it was intended," Mr Minney said.
"Hoarding the nest egg means they are missing out on some of what they could enjoy."
The survey revealed that nearly 84% of respondents were hanging onto their capital to ensure sufficient money would be available for future health and medical costs.
Retirees are also prioritising having money available to cover other unexpected expenses or emergencies, showing 70% are setting aside 'rainy day' funds.
When it comes to retirement income, the report showed there is still a disparity between men and women - with women trailing men on nearly every superannuation score.
"More men enjoy a comfortable retirement from super, and more women than men have super balances so low, they are reliant on the age pension." Professor McCallum said.
The importance of home ownership in retirement was also highlighted in the report, revealing that older retirees found more comfort in the security of having a home than in having high savings.
Despite having easy access to home equity in retirement, the survey showed that only 2% of respondents had accessed their home equity.
While two thirds admitted that leaving their home as a bequest upon passing was important to them.
The report also coincides with the implementation of the retirement income covenant in July.
The covenant was legislated by Government to ensure superannuation trustees develop a strategy for their members retirement income, as well as properly manage any associated risks.
"As the report has concluded, retirees and pre-retirees need better access to financial advice and user-friendly tools that account for the complexity of intersections between the retirement income system and peoples’ housing, health, aged care and employment circumstances," Mr Minney said.
"Further, super funds need to have a strategy for managing the financial risks facing retirees and help them
maximise their income in retirement.”
13 super funds fail performance test
Coming off back of the evolution of retirement income report, the Australian Prudential Regulation Authority (APRA) has also released new data, showing the results of the second MySuper performance test.
APRA's annual performance test was introduced last year to protect members from poor outcomes and hold trustees accountable for the implementation of their investment strategy.
The test assesses products’ long-term performance against a benchmark tailored to each product’s asset allocation.
In 2021, 13 MySuper products failed the test of which four have since exited.
This year the APRA assessed 69 MySuper products, with at least five years of performance history, against an objective benchmark that analysed two components: investment performance, and fees and costs.
Five of the products failed to pass the benchmark, including four which failed for the second time.
A product that failed to pass the test for the first time was the Westpac Group Plan MySuper.
Trustees of this product will have to notify their members of that result by 28 September 2022.
MySuper products that failed a second time included LifetimeOne, Balanced (MySuper), BT Super MySuper and AMG MySuper.
The four products that failed the test for a second time are now closed to new members, three of which were offered by trustees with plans to exit the industry.
Efforts are now underway to transfer more than 500,000 members of those three products to new MySuper products before the 2023 performance test.
APRA Member Margaret Cole said the APRA’s intensified supervisory approach is driving trustees to take meaningful action to improve member outcomes.
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