Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 195

Big increase in retirees expecting to outlive their savings

One of Australia’s leading research firms, Investment Trends, has revealed fewer people feel prepared for retirement than at any time since this question was first asked in 2012. The survey of almost 7,000 Australians over the age of 40 revealed only 44% feel prepared for retirement, but worryingly, this is down from 49% in 2015.

In addition, the 2016 Retirement Income Report shows a remarkable increase in the proportion of retirees who expect to outlive their retirement savings, reaching 51% from only 33% in 2013, as shown below. At a time when Australians have access to more education and advice on retirement than ever, and after 25 years of compulsory superannuation, the worsening of expectations is disappointing.

Reasons for the loss of confidence

The researchers identified many reasons for the lack of confidence about future finances from Australians who have not yet retired, as shown in the table below, including:

  1. Inability to accumulate sufficient wealth and then not having enough to retire on
  2. The rising prices of goods and services (although less of a concern than last year)
  3. Worries about potential falls in the share market affecting the value of superannuation
  4. Adverse regulatory changes to superannuation.

This poor result is despite share markets performing reasonably well in the last two years (many global markets are trading at an all-time high), superannuation funds delivering solid results and a strong property market supported by low unemployment.

The same concerns translate into income worries, with half those surveyed saying they need at least $3,000 a month in retirement, but only one-third of respondents expecting to achieve this level.

The role of financial advice and planning for aged care

Most Australians do not have a good understanding of retirement products such as annuities or allocated pensions, with only 11% describing the retirement product range as “appealing”. The traditional focus on the accumulation stage for superannuation and the media attention on contribution rules and advantages of super have left innovation in the retirement phase in the shadows.

The planning for aged care is even worse. Less than one in five people not yet retired have considered how much it might cost to cover aged care needs. Most people expect to simply turn to government services or the medical profession to cover aged care needs, without considering the future ability of government budgets to pay for such a service.

“As an industry, we must address Australians’ lack of engagement on the topic of aged care and better prepare them for potential aged care needs,” said Investment Trends’ Senior Analyst, King Loong Choi. “This will require further action from super funds, financial advisers and product providers. The government and medical professionals also have a role to play in growing Australians’ awareness of the financial aspect of aged care, particularly in light of our aging population.”

Only about 20% of Australians have a financial adviser, but the research shows those people allocate about twice as much to retirement savings as those without a planner, who tend to spend more on lifestyle choices such as holidays, renovations, new vehicles or boats.

With interest rates on savings low, and share markets considered expensive, there are a few ways to address the potential shortage of money in retirement. These include the unpalatable choices of saving more, spending less or working for longer. Those sacrifices might be necessary to avoid a retirement worrying about money. It also helps to understand the superannuation rules and to take advantage of the tax-efficiency of long-term saving in super.


Graham Hand is Managing Editor of Cuffelinks. Graham will be speaking at the Australian Shareholders' Association's Conference 2017 in Melbourne on 15 May 2017. Early bird rate ends 31 March 2017.

Graham Hand
January 28, 2018

Hi Aaron, not 100% sure I have the complete picture as the people in the call centre would not say who managed the index exposure. I believe the cost of the Hostplus Balanced Index is an Investment Fee of 0.02%, an ICR (Indirect Cost Ratio) of 0.04%, plus the weekly fee. The call centre told me it was only the 0.02% which is why I'm not completely satisfied, but either way, it's a cheap cost for a balanced fund providing the $78 fixed cost is spread over a large amount. The other issue is that if the index exposure is provided by the Macquarie True Index product, then there is a derivative risk involved against Macquarie, which is probably acceptable.

Aaron Hill
January 27, 2018

Hello Graham,
were you able to find the information from the low-cost super fund to provide an update?

Not asking for a recommendation, just the benefit of your expert questioning.

Thanks for your time,
Aaron Hill

Mette Schepers
March 27, 2017

Agree, the 8,000 days only starts at retirement. See "Inventing a new story for 8,000 days of retirement" by Joseph Coughlin. Accumulation is not the whole game.

March 25, 2017

I think ING had a free super scheme. I couldn't believe it so decided to check it out. Seems that you give them the money, they give you around 2% and the money funds their mortgage book. No wonder it was free.

Graham Hand
March 25, 2017

Something to watch in any product is whether the 'fee' is in another part of the structure. A couple of examples: a fixed interest fund might be 'free' but the fee is earned by paying a lower rate. Or some robo-advisers quote their 'fee' but ignore the cost of the ETF, which subtracts the fee of say 30bp from the investment returns.

March 25, 2017

Have a look at the Host Plus Indexed Balanced super fund. I challenge anyone to find a lower cost super fund in Australia. Jeff

Graham Hand
March 29, 2017

OK, thanks for the many comments advising that HostPlus offers a Balanced Indexed super option for 0.02% (2bp). It seems too good to be true, so I have now made five calls to HostPlus trying to find out whether there are other costs. There is an annual admin fee of $78 across the entire account (not option specific), which would on $10,000 be a material 0.78%. But on $100,000, it's 0.08%, which takes the option cost to only 10bp on $100,000. I was not able to find out exactly what structure HostPlus invests into but I assume it is an insto index mandate which costs large investors only 1-2bp. Cuffelinks does not endorse or promote particular products and we have no affiliation with HostPlus (and it took them a long time to return my phone calls) but for a large amount, this looks a very competitive product.

March 30, 2017

Hi Graham,

Did a bit of digging around on the internet and found a recent article in Money magazine (2017). In it they say that the Hostplus Balanced Index super option currently uses 37.5% Australian shares with Industry Funds Management (IFM), 37.5% International shares with Blackrock, 15% fixed income with Macquarie and 10% cash with Citigroup. The admin fee of $1.50 per week ($78 p.a.) remains unchanged since 2004. Additionally they state that Hostplus has recently reduced the investment management fee from 0.02% to 0.015%, and they have achieved further reductions in their in-super insurance premiums too.

Similarly, a bit of research into Blackrock funds reveals that a similar Indexed International Equity Fund (BGL0106AU) has returns, net of fees (0.2%), of 1 yr: 12.52%, 3yr:11.06% and over 5 yr:17.49%!!

March 24, 2017

If you're worried about fees (& you should be) try a low cost index fund with about 30% Australian equities, 30% international equities and the remainder fixed interest and cash. MER 0.02% pa, that's $200 per $1M!

Jack Bogle, Founder of Vanguard once commented that "the magic of compound returns is overwhelmed by the tyranny of compound costs".

No superfund charging highish fees is going to outperform an index based fund over the long run! However the ASX200 is pretty crap due to dominance of a few big companies, so you need international exposure too!!

Graham Hand
March 24, 2017

James, where do these costs come from? If you mean ETFs, they cost far more than 0.02%. Assuming you mean ETFs (because the amount is not large enough for an insto mandate), then perhaps 0.2% or $2,000 is more like it.

March 24, 2017

Graham, wasn't wanting to get specific, but as you asked.
I've been with Hostplus for a couple of years now. Their Indexed balance option has a total investment management cost of 0.02%!
Their 5 year compound return, net of fees is 9.1% pa.
Check out their member guide PDF if you don't believe me!

John K
March 25, 2017

Graham, I think you will find that the fees for "Hostplus Indexed Balanced Fund" are amazingly 0.02%, according to the PDS. I found this difficult to believe.. I've suggested to many friends and relatives that they move to this almost fee free environment.

Errol Davey
March 24, 2017

Industry Funds also charge between .5% to 1% of balance also.Mark!

March 23, 2017

After establishing a SMSF and having experienced two very poor financial advisers whose interest was more about fees than our long-term financial security, we have wound up our SMSF, rolled over our $1.7M into a low fee, public sector superannuation pension accounts and have the benefit of two reviews annually for less than $2,600 by the Fund's FA.
The average Adviser charges 1% of superannuation balance. On a $500,000 balance invested in a share fund growing at around the average, that 1% charged by the adviser will amount to total fees of $420,160 over 20 years! There should be greater emphasis on the benefits of low cost industry super funds, who also offer free or low cost financial advice also.

March 25, 2017

I've never understood why the aim should be to try to get a small amount of pension.Why not aim to have a high income and then no pension,far better off.

For the pension loan scheme does that not have a cut off point (means testing) or am I confusing myself.


Graham Hand
March 25, 2017

Hi Kevin, not correct on the means test for Pension Loan Scheme. It is only for those on a part age pension to top up to a full pension by borrowing from the government. It's still a useful scheme which we have written about here:

March 26, 2017

Hiya graham

Thanks, it came to me later in the day that it was a top up scheme.Thus confusing myself. Means testing was the wrong terminology, I know I can't get it as I do not qualify for any gov't support under means testing. It is a good scheme and should probably be more widely promoted.

While I can't predict the future, for a number of years now I have been thinking. What if the gov't decides now people have their super, run that down and then come and see us. Perhaps I should stop thinking.

March 23, 2017

As a working boomer with assets outside super I have just ploughed a fair whack of it into my property.The super companies spruik about "comfortable " retirements, my home extension has certainly increased my comfort level as well as allowing for a wood fired heating system and solar panels for water heating. I am so grateful for the superannuation I have been able to access this year and in the next few years my ttr will pay down the remaining mortgage. I will still have a bit of super left but will ensure that with other assets my access to age pension is not affected by the assets $3.00 per $1000 reduction rules .I may miss out on some investment income via super but I will cut down on living expenses as heating in Tassie takes a fair whack of the budget.In any event I am in the position of many boomers having enough super to be a Centrelink Age Pension asset reducer [$3 per$1000 reduction] but no where near enough to be financially independent . Finally I doubt when I retire that I will keep any mone at all in super, preferring instead to invest elsewhere .Apart from the fees there is the glaring elephant in the room concerning superannuation that unlike Australian banks super has absolutely no mechanism for a government backed guarantee for monies invested .

March 23, 2017

Andy you have a right to structure your assets to maximize benefits but you're assuming no further reduction in the Centrelink assets test. Brave call because if you reduce your assets but the government reduce the limits then you will struggle to replace lost Age Pension benefits. To use the old adage, you can't sell a bathroom to release cash ....but I suppose you could use the Pension loans scheme or reverse mortgage so you may be laughing long term. Each to their own long as you sleep soundly at night.

David G
March 23, 2017

Graham, regarding the cover note of your newsletter, I have been a subscriber to The Economist for at least thirty years. My recollection is that every time they have carried anything on international housing prices they have ALWAYS commented that Australian prices are way out of line, usually as #1 or 2 in this regard and usually by about 30%.

March 23, 2017

This deterioration in retirement confidence levels identified here is concerning. As Graham Hand points out, a lack of focus on the retirement phase of the system is likely contributing to the problem. Let's hope data like this awakens our industry to the need for a swift and effective response...

March 23, 2017

Well, some retirees have only themselves to blame; not to say that "you didn't save enough" at the front end, but at the back end of the issue, some of them have the attitude that they will "SKI" it all away. What do you really expect if you do that ?!

March 23, 2017

So true but tell me where is the work for the over 60s unless you start up your own business which may risk your retirement egg !

March 23, 2017

Retirement is over-rated. Tried it twice. Bored out of my brain. It should not be only about the money. You need something to do as well.


Leave a Comment:



A simple method to help mitigate sequencing risks

Is this your biggest retirement worry?

Two factors that can transform retirement investing


Most viewed in recent weeks

10 reasons wealthy homeowners shouldn't receive welfare

The RBA Governor says rising house prices are due to "the design of our taxation and social security systems". The OECD says "the prolonged boom in house prices has inflated the wealth of many pensioners without impacting their pension eligibility." What's your view?

House prices surge but falls are common and coming

We tend to forget that house prices often fall. Direct lending controls are more effective than rate rises because macroprudential limits affect the volume of money for housing leaving business rates untouched.

Survey responses on pension eligibility for wealthy homeowners

The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?

100 Aussies: five charts on who earns, pays and owns

Any policy decision needs to recognise who is affected by a change. It pays to check the data on who pays taxes, who owns assets and who earns the income to ensure an equitable and efficient outcome.

Three good comments from the pension asset test article

With articles on the pensions assets test read about 40,000 times, 3,500 survey responses and thousands of comments, there was a lot of great reader participation. A few comments added extra insights.

The sorry saga of housing affordability and ownership

It is hard to think of any area of widespread public concern where the same policies have been pursued for so long, in the face of such incontrovertible evidence that they have failed to achieve their objectives.

Latest Updates


The 'Contrast Principle' used by super fund test failures

Rather than compare results against APRA's benchmark, large super funds which failed the YFYS performance test are using another measure such as a CPI+ target, with more favourable results to show their members.


RBA switched rate priority on house prices versus jobs

RBA Governor, Philip Lowe, says that surging house prices are not as important as full employment, but a previous Governor, Glenn Stevens, had other priorities, putting the "elevated level of house prices" first.

Investment strategies

Disruptive innovation and the Tesla valuation debate

Two prominent fund managers with strongly opposing views and techniques. Cathie Wood thinks Tesla is going to US$3,000, Rob Arnott says it's already a bubble at US$750. They debate valuing growth and disruption.


4 key materials for batteries and 9 companies that will benefit

Four key materials are required for battery production as we head towards 30X the number of electric cars. It opens exciting opportunities for Australian companies as the country aims to become a regional hub.


Why valuation multiples fail in an exponential world

Estimating the value of a company based on a multiple of earnings is a common investment analysis technique, but it is often useless. Multiples do a poor job of valuing the best growth businesses, like Microsoft.


Five value chains driving the ‘transition winners’

The ability to adapt to change makes a company more likely to sustain today’s profitability. There are five value chains plus a focus on cashflow and asset growth that the 'transition winners' are adopting.


Halving super drawdowns helps wealthy retirees most

At the start of COVID, the Government allowed early access to super, but in a strange twist, others were permitted to leave money in tax-advantaged super for another year. It helped the wealthy and should not be repeated.



© 2021 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.