Renting retirees seem to have been left out of government policy settings when it comes to retirement income, with new Milliman research finding that a retiree without a home should be prepared to find an extra $500,000 in superannuation savings to fund the same lifestyle as a homeowner.
The findings showed that a 65-year-old “urban renter” retiree would be forced to spend an extra $15,000 per year more than the “nationwide” retiree, with nearly half of their budget allocated to rent. By age 85, the urban renter would be spending more than $20,000 a year above the expenditure of nationwide retirees who own their homes.
Urban renters, which require more than double (one million as opposed to $500,000) the funds of nationwide retirees, also face arbitrary policy settings which favour homeowners, for example low levels of subsidy.
With one quarter of retirees expected to still be paying off a mortgage or renting in retirement and recent trends show declining home ownership, Milliman suggested super funds delve a little deeper into their membership to understand their circumstances before offering advice.
The consulting firm said in some cases, Australians might be better off diverting savings towards home ownership rather than superannuation.
While the Financial Advice Association Australia said it supports a performance testing regime “in principle”, it holds reservations about expanding this scope to retirement products.
In a Senate submission, the Financial Services Council said super funds should be able to nudge members on engaging with their super and has cautioned against default placements.
The Joint Associations Working Group, which counts FSC in its ranks, has issued an urgent warning to the government.
Senator Jane Hume will join the speaker lineup at the inaugural Australian Wealth Management Summit.
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