Australians have been accused of living “more frugally” than they need to in retirement, but the reality when you talk to those nearing or in retirement is that there’s a lot of fear out there, according to Aware Super CEO Deanne Stewart.
Speaking at an Australia-Israel Chamber of Commerce event last week, Stewart attributed this fear to a lack of understanding of the complexity of the retirement system and a fear of outliving one’s money.
“So, with all this talk in the press at the moment of money being hoarded and passed down the next generation, I think you’d go ‘oh, that must be all about estate planning’,” she said.
“No. Actually, the facts are very different on the ground. More than 80 per cent of those who are 80 or above do not have any super in their last four years. So, there’s a lot of myths that are out there.”
Stewart’s comments come ahead of the public consultations on retirement income settings expected to be launched by Treasurer Jim Chalmers within weeks.
Similarly, Bernard Reilly, CEO of the Australian Retirement Fund, warned a significant number of people were not moving to the retirement phase because they lacked confidence.
The accumulation phase incurred a 15 per cent tax, but in retirement, the tax rate was zero. So, a big group of Australians are working against themselves, he said.
Stewart called for a very database-driven conversation where we start to talk about the next range of innovative solutions for retirement.
“For us, it is about giving retirees the comfort of an income stream that they can change over time. It’s about building some form of longevity into it and it’s allowing them to adapt it as their retirement and the phases of retirement changed.”
Stewart said the retirement income solution that Aware Super is working on was focused on helping members work out what their right drawdown rate is but in a way that is based on their goals and their own individual life expectancy.
A problem is that retirees don’t know how much to draw down so it’s important to have guidance through the solutions and different solutions for different cohorts, she said.
Stewart added that part of the solution was providing members with the right guidance to help them feel comfortable and confident with their decisions. “The next part of it is how you make this as easy as possible because it’s a really hard system to navigate… You demystify it and make it as simple and as seamless as possible.”
She also commented on APRA’s heat map. “The number one thing that would help this industry is to stop talking about one-year performance,” she said.
“We are not designed for one-year performance and nor should we be. And from a media perspective, nor should we be judged that way either. Take 2022. Who were the heroes of 2022? Thermal coal companies, oil and gas and that created a distinction in what funds did well over one year and not over one year.
“That for me is totally the wrong way of looking at it. Having conviction, which we certainly do, and being able to ride that out for the medium and long term is totally where we’re focused is a super fund.”