If the Government wants retirees to make greater use of their superannuation balances it needs to help ensure they have greater clarity around retirement income adequacy, according to Deloitte superannuation partner, Russell Mason.
Discussing some of the key findings of the Retirement Income Review (RIR), Mason said he believed that fear and a lack of information sat at the heart of retirees not spending their superannuation balances.
“This uncertainty in life expectancy, together with the uncertainties of inflation, low interest rates and market downturns, means that most retirees, quite understandably, will err on the conservative side when it comes to spending their savings,” he said.
“Many are not intentionally trying to under-spend in order to leave inheritances but rather are trying to ensure their retirement savings will last through to death. For many relying solely on the age pension in their final years will not be enough and might otherwise mean they would need to rely on the support of family, which cannot be guaranteed,” Mason said.
However, he said he disagreed with the RIR report’s suggestion that keeping the superannuation guarantee (SG) at 9.5% would cause people to make more efficient use of their retirement savings.
“I don’t agree with this assumption. The reason retirees die with the bulk of their wealth intact is in part due to the uncertainty they face in retirement,” he said.
“Today a female retiree at age 65 can expect, on average, to live approximately 23 years while a male retiree at age 65 can expect to live approximately 20 years. But these are only averages and we all know that, thanks to medical advances and improved living standards an increasing number of retirees will live to age 100 or beyond.”