Mary Atley Super-Savvy Tips Interview

Research released today by REST Industry Super, one of Australia's largest superannuation funds with more than $37 billion invested on behalf of members, has revealed that older working Australians have big plans for their retirement, but that these may not match the reality of their superannuation savings.

The Journey Begins, an annual white paper commissioned by REST, captured the attitudes of just over 1,000 working Australians aged 50 or over toward their financial situation, plans and expectations as they set out on the road to retirement.

The research showed that 72% of older working Australians with adult children are planning to help them financially, primarily by drawing down from their superannuation balances on retirement.

Of the reasons why retirees were planning to draw down on their superannuation to help their children, organising to leave a significant inheritance (36%) topped the list, followed by helping to pay school fees for their grandchildren (29%), helping their children afford a holiday (27%) and helping their children pay for a deposit on a house (21%).

The research also found older working Australians expect to have a shortfall of funds in retirement, with nearly a third of those aged over 50 having a balance of less than $100,000. Half of the survey respondents believe they'll need to rely solely on the Age Pension to fund their retirement.

And while only 55% of older Australians expect realistically to be able to afford a 'modest' retirement, three in five (60%) say that a modest retirement will not be enough to fund their retirement plans. Only 39% of those surveyed expect to be able to fund what they defined as a comfortable retirement.

REST Industry CEO Mr Damian Hill said that while the findings indicated that older working Australians were conscious of the need to plan for retirement, they also showed most are still expecting to rely on the Age Pension, equity in their home or government payments to support their retirement.

"Older working Australians are planning to work longer to provide themselves with the retirement they'd like to enjoy – respondents in this survey on average said they want to retire at 67 but expect to do so at 69," Mr Hill said.

"Part of the reason for this shortfall is that older working Australians – the baby-boomer generation - have only been accumulating meaningful superannuation since the compulsory guarantee levy was introduced in 1992, so don't have the benefit of decades of savings to retire on," Mr Hill said.

According to the REST survey, inheritance is expected to be a key factor of retirement funding. Of the 31% of respondents who expect to receive an inheritance, nine in 10 anticipate putting at least some this windfall toward funding retirement.

At the same time, 32% of people surveyed believe rising housing prices mean they will need to pass on any money they inherit to their children to help fund a deposit on a house. Corelogic RP Data's Home Value Index shows average property values in the Sydney market have increased by 76% since 2009, with strong increases in other states.

For people who had received an inheritance the average windfall was $110,000, while those anticipating a future inheritance expect to receive on average around $250,000.

"What comes through clearly is the desire of people approaching retirement to ease the financial burdens their adult children face today, especially buying a house and covering school fees," Mr Hill said.

"That's laudable but we would urge retirees not to forget that their retirement savings are first and foremost meant to fund their own retirement, and using retirement savings for other purposes may mean they become a financial burden on their own children later in life."

When probed on their attitudes toward accumulating superannuation, older workers appear to have reservations about self-managed super funds (SMSFs) as a savings model. Of the small number (one in ten) who are using an SMSF, a quarter wouldn't have started one had they known how much work was involved. More than a third said their SMSF had made more money for their accountant than themselves.

"This suggests self-managed super funds aren't appropriate for everyone. The cost to maintain an SMSF, both financially and in terms of time, is significant and usually more than what people think," said Mr Hill.

Debate around proposed changes to superannuation regulations have knocked the confidence of older Australians, with 86% of respondents concerned that government intervention in the sector will actually damage their retirement savings.

"To us, this reinforces the need for the purpose of superannuation to be enshrined in legislation, so that future changes are aligned with the objective of superannuation toward funding retirement income," said Mr Hill.

Six Ways To Be Super Savvy

Be realistic
Review whether your current contribution rate will in fact deliver the lifestyle you want. If your vision includes regular holidays, luxurious hobbies and treating the grandkids, it may be time to boost your saving schedule.

Do your homework
Ignorance is less than bliss when it comes to preparing for your financial future. Make sure you understand how and where your super fund is investing your savings, and that this complements your other investments.

Tenaciously top up
Consider making additional contributions from your take home or before tax pay – particularly after a pay increase; when you'll miss it the least. Even if it isn't much, it could make a significant difference due to compound interest.

Be faithful to one fund
When it comes to super funds, the more the merrier rule doesn't apply. Kick any extra memberships to the curb and consolidate; avoiding the unnecessary administration fees attached to each one. Before combining your super, you should check how it might affect your insurance in your other funds and if they have any exit fees.

Momentum is key
Make up for any time off work by making personal contributions to your super before, during or after a career break. There's also the option for your partner or spouse to make contributions to your super on your behalf.

Seek expert advice
Consult with a financial planner to ensure your saving plan is right for your needs. Subject to superannuation laws, REST will pay for its members' first single super-related question with a Money Solutions* coach.

REST is one of Australia's largest super funds by membership with over $37 billion in funds under management as at 30 June 2015 and around two million members. SuperRatings awarded REST Pension of the Year 2015, the second year in a row REST has won this award. REST also received Money magazine's 2015 and 2014 Best of the Best award for Best Super Fund Manager and Best Pension Fund Manager as well as receiving Super Fund of the Year for 2014 at the Chant West/Conexus Financial Super Funds Awards.

Interview with REST Industry Super General Manager for Brand, Marketing and Communications, Mary Atley

Question: What surprised you about the latest REST research?

Mary Atley: It was surprising to discover more than half of older working Australians are expecting to rely on the age pension when they retire. In fact, nearly a third of those aged over 50 surveyed have a balance of less than $100,000.

It's also interesting to note the debate around proposed changes to superannuation regulations is having an impact on their confidence. A huge majority (86%) of respondents express concern that Government intervention in the sector will actually damage their retirement savings.

Another core insight was that inheritance is expected to be a key factor of retirement funding, with nine in 10 of the 31% of Aussies who expect to receive an inheritance anticipating they'll put at least some of this windfall toward funding their retirement.


Question: What do you hope to achieve with The Journey Begins?

Mary Atley: Since 2012, we have commissioned The Journey Begins white paper to gain an insight into the attitudes of more than 1,000 working Australians aged 50 or over toward their financial situation, plans and expectations as they set out on the road to retirement.

Essentially, the aim is to encourage this audience to review whether their current contribution rate will in fact deliver the lifestyle they want. If their vision for the future includes regular holidays, luxurious hobbies and treating the grandkids, it may be time for them to boost their savings schedule.


Question: Are you surprised that "72% of Australians have earmarked their retirement savings to help their adult children financially"?

Mary Atley: At REST, we understand these respondents' urge to ease the financial burdens their adult children face today, especially when we take a closer look at how they plan to allocate this money.

The research shows that of the reasons why retirees plan to draw down on their superannuation to help their children, organising to leave a significant inheritance (36%) tops the list, followed by helping to pay school fees for their grandchildren (29%), helping their children afford a holiday (27%) and helping their children pay for a deposit on a house (21%).

Perhaps this last statistic in particular is more understandable still when you consider that average property values in the Sydney market have increased by 76% since 2009, with strong increases in other states.* Indeed, 32% of people surveyed anticipate that rising housing prices mean they will need to pass on any money they inherit to their children to help fund a deposit on a house.
While we commend this thinking, we'd strongly encourage retirees not to forget that their retirement savings are first and foremost meant to fund their own retirement. The implication otherwise is that they may end up becoming a financial burden on their own children later in life.


Question: What is classified as a 'modest' retirement?

Mary Atley: The people surveyed in our research responded to this based on their own interpretation of what they believe to be a modest retirement. ASFA however, has a definition for this term in their Retirement Standard.


Question: Why do as many as three in five (60%) say a modest retirement will not be enough to fund their plans?

Mary Atley: While we don't know what they're expectations are from a modest retirement, we know that many people won't be able to afford fairly basic activities like an occasional holiday, private health insurance and a reasonable car. This could be the reason why they don't believe it will be enough to fund their plans.


Question: Why do you believe it's important to be faithful to one super fund?

Mary Atley: When it comes to super funds, the more the merrier rule doesn't apply. We'd suggest members consider combining their super into one fund, to avoid unnecessary administration fees.

Before combining your super, we'd also recommend checking how this might affect your insurance in your other funds and if they have any exit fees.


Question: Why should we make personal contributions to our super?

Mary Atley: In essence, even a small additional contribution could make a significant difference further down the track because of compound interest.

It's also worth considering making personal contributions to your super before, during or after a career break, to keep you on track.

If you're ever unsure, your best bet is to consult with a financial planner to ensure the contributions you're making will indeed meet your retirement needs. Subject to superannuation laws, we'll pay for our members' first single super-related question with a Money Solutions coach.


Question: How often and how can we make personal contributions to our super?

Mary Atley: If you're making personal contributions to your super, you can do this two ways. There is an after- tax contribution which you make from your take home pay, that is, after your income tax is deducted from your salary. The other way is before-tax which is an arrangement made between you and your employer where contributions are taken out of your pay, before income tax is deducted, and sent to REST on your behalf by your employer.

Members can set up personal contributions easily by visiting our website at rest.com.au/grow. Alternatively they can call us on 1300 300 778.


Interview by Brooke Hunter