Analysis by SuperEd has found that single retirees are on average losing $37,000 in age pension entitlements due to delays in applying for the age pension while couples are typically losing close to $60,000. SuperEd’s review of data from its Retirement Essentials service indicates that Australians often apply for the age pension well after the time they become eligible, on average about 2.3 years after. There are several reasons for this including:
- Some people are still working
- Many - often incorrectly - assume they won’t be eligible so don’t bother
- Others don’t want to rely on the pension, perhaps for reasons of pride
We see procrastination as particularly concerning. Many people put the application aside as they don’t want to have to deal with Centrelink or perhaps because they don’t understand that every week they delay is costing them money. For a single person eligible for a full age pension the loss per week is close to $500. To compensate for the loss of the age pension retirees will be forced to deplete other savings - including their superannuation - which will materially affect how comfortable their retirement will be.
The age pension is a vital pillar of the retirement income system and 70% of retiring Australians will be eligible for a full or part pension. According to the Australian Bureau of Statistics the pension, or other Government allowance will be the main source of income for 57% of Australians over age 65. With so many Australians eligible for the age pension, the bulk of whom will have it as the main source of their income, super fund trustees should be doing everything they can to ensure members get access to the age pension as soon as they are eligible.
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Adapted from Jeremy Duffield’s speech at ASFA 2015
Apollo 11 astronaut Buzz Aldrin, speaking at ASFA 2015, talked about mankind’s push to get to Mars as our next great space challenge. Buzz claimed “Our future is in space.” Well, the super industry may have its feet more fixed on the ground, but we have great challenges and opportunities, too. To paraphrase Buzz, I reckon: “Our future is in advice.”
Do your members have the tools and advice they need to make the right decisions to optimise their retirement income?
The Australian super system makes the individual responsible for their own retirement success. But the average person doesn’t know what are the right decisions or which actions they should take - they need financial advice.
The mandatory nature of Australia’s super system means that most people are responsible for making important financial decisions about their retirement. But how well equipped is the average Australian to make decisions about super and retirement planning? Research into the financial literacy of Australians, suggests that most are not well equipped at all and that financial literacy is key to successful retirement planning.