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Aussies to rely on asset sales or an inheritance to fund retirement

Published on 24/07/2012

Tuesday 24 July 2012: With just 23% of households confident their super will fund a decent retirement, Australians are pinning their hopes on selling off assets, earning more, and receiving an inheritance to make up the shortfall.

The latest ING DIRECT Financial Wellbeing Index confirms the remaining 77% will do the following to bridge the gap:

  • 21% plan to sell personal assets
  • 21% will rely on  income from non-super investments
  • 16% are hoping their salary will rise over time
  • 10% are relying on an inheritance.

Key findings for Q2 2012 (surveyed in June and July 2012):

Australians have limited personal connection to their superannuation savings: 

  • 26% hold multiple super accounts
  • 74% don’t understand how their super is invested – including 67% of baby boomers
  • 77% are not confident their super will provide a comfortable retirement
  • 38% are aware of the super shortfall but don’t know how to bridge the gap, a figure that rises to 51% of baby boomers
  • Almost one in five (17%) households have given no thought to how they will make up the shortfall in their super.

The quarterly Financial Wellbeing Index rates household comfort levels across six key aspects of personal financial wellbeing including credit card and mortgage debt, savings, investments, household income and ability to pay bills.

The ING DIRECT Financial Wellbeing Index fell to 105.6 in Q2 2012, down from 106.9 in Q1, to reach the same Index score for Q4 2011 – the lowest Index reading since its inception in Q1 2010.

In Q2 2012, household comfort levels fell across five of the six indicators, with only a modest rise recorded in comfort with long term investments. Households are most comfortable with their long term debt (mortgage) and 48% of households with a home loan are ahead with their repayments. Six out of ten (61%) households are ‘very comfortable’ with their long term debt.

Across the nation, financial wellbeing has risen sharply in NSW (108.1 in Q2 up from 105.2 in Q1), while deteriorating in Queensland (105.5 in Q2 versus 109.0 in Q1) where comfort levels with household income and savings declined over the quarter.

Australians in the dark about super

When it comes to superannuation, only 26% of households have a thorough knowledge of how their nest egg is invested. Among baby boomers (aged 50-64) one in three (33%) understand their super’s investment allocation.

Low levels of awareness are underpinning a lack of confidence in super, with only 23% of households (22% of baby boomers) confident their super will fund a comfortable retirement.

Among the 77% of households who lack confidence in their super, 38% aren’t sure how they can bridge the gap (51% among baby boomers). One in four (21%) intend to sell personal assets, with an equal proportion relying on returns from non-super investments.16% expect their salary to rise over time, and one in ten (10%) households are pinning their hopes on an inheritance.

Greater involvement with super boosts confidence

The Financial Wellbeing Index confirms a link between understanding how super works and having confidence in super as a retirement asset.

More than one third (39%) of households with a thorough knowledge of their super are ‘very confident’ their superannuation will deliver a decent retirement compared to 13% of those with ‘no idea’ about their fund’s investment allocation.

Ms Anne Myers, Chief Operating Officer of ING DIRECT says, “It is worrying that Australians have such low levels of understanding – and confidence – in the nation’s $1.34 trillion[1] pool of superannuation savings. The complexity of our superannuation system has undoubtedly contributed to the disconnect we feel with our retirement savings.”

Media contact:

Caroline Thomas
Ph: 02 9018 5160
M: 0413 317 225
caroline.thomas@ingdirect.com.au

 

Research methodology  

The ING DIRECT Financial Wellbeing Index was complied by Galaxy Research from the online responses of 1,015 households between 28 June and 2 July 2012 (Q2). The data was weighted by region and household size to reflect the Australian household population based on the 2011 census. The level of savings reported in the study is also calibrated to APRA national bank total deposits (households) to ensure accuracy of household savings levels.

About ING DIRECT

ING DIRECT began operating in Australia in 1999. By doing business online, over the phone and through intermediaries, ING DIRECT keeps it overheads low and passes the savings onto customers in the form of competitive rates. Today, it has grown to become Australia’s fifth largest retail bank, with $26 billion in deposits, more than $38 billion in loans and around 1.4 million customers.

Please note ING DIRECT is never abbreviated to ING.

 


[1] APRA June 2011 Annual Superannuation Bulletin, February 2012.

 

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