Pre-retirees remain wary
We recently held focus groups to talk planning and income in retirement. Across the board, people are sceptical - looking for answers and advice they can trust and wary of changing legislation and market downturns.
Here we share the key themes which emerged – not surprisingly around adequacy and trust.
“I want to really understand how much income I'll need."
Our participants were looking for help in working out how much they would need – realistically - both in terms of their super as a lump sum and the retirement income that it could provide. Many expressed feeling a lack of control over their future income.
They’d sought advice in the past and been provided with an estimate of the lump sum they would need to fund their retirement. Typically, people were told they’d need a lump sum of at least $500,000. This caused concern for two reasons - firstly for most of the group there was a big gap between $500,000 and the account balance they are shown on their super statement. And secondly because there was little understanding of what $500,000 meant in terms of a regular retirement income or what part the Age Pension could play.
“My tax agent said that I’d need $500,000 – I’m nowhere near it so I put my head in the sand.”
The response to this was split. Some respondents saw $500,000 as so far out of their reach that they were overwhelmed by a feeling of helplessness. This led to them ignoring their super and retirement situation.
Others became anxious about the progress of their super investment, checking it daily and focussing on short-term market volatility.
“As soon as you said risk, I didn't like it.”
For our retirement planners, the best outcome wasn’t always a higher retirement income. We know that many people become more conservative the closer they are to retirement. So, for some their primary objective became protecting their potential retirement income, rather than growing it.
There is some understanding that without risk they may not be able to maximise their retirement income, but the GFC and its consequences are still close to mind, leading to caution.
“That's it if you make the wrong decision...”
As you would expect most people have a level of concern around retirement planning and income. Our participants were particularly concerned about making a mistake, so were generally looking to entrust someone else.
Most did not see themselves as experts and saw education as a way to better understand the advice that they had been given and value education as part of any advice offer.
“The government will force us to work longer... How will the rules change? Will the pension still be in place when I retire?”
We began our research just after the 2014 Federal Budget. The changes created a lot of uncertainty for people – particularly around the role of the Government. The perception was that the Government are always changing the rules, making it hard to develop a longer-term retirement planning strategy.
Participants also expressed a distrust of advisers. Advisers were seen to have a barrow to push, so commission-free, independent advice was favoured. But there was a feeling of vulnerability and participants didn't know how they could be sure that advice was in their best interest.
“The industry seems dodgy...You don't know if they're looking after your best interests...Where do I go for trusted help and advice?”
As far as establishing the credibility of an advice provider, many sought the recommendation of a family member or friend or looked for positive independent media. Others sought advice via an existing positive relationship – such as a super fund.
Two themes that came through very strongly across our focus groups were:
1 the need to understand possible retirement income and required income
2 the need to be confident that the help and advice they receive is in their best interest.
Super funds are in a great position to address these needs through the provision of affordable independent advice, retirement income estimates (potentially as an addition to the annual statement) and ongoing, relevant education. For more information about how SuperEd can help your members, call us on +61 (0)2 8282 2982.
SuperEd conducted detailed qualitative research, the latest round concluded in October 2014.