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Retirees hoarding super to pass onto future generations
Over half of super members intend to leave their superannuation to their loved ones when they die, highlighting the need for an objective of super.
Fidelity International’s latest Rainbow’s end report was conducted by MYMAVINS and surveyed 1,500 Australians over the age of 26 on their thoughts on wealth transfer.
The objective of super is currently being consulted by Treasury and the proposed objective is “to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way”.
While it mentions ‘preserving savings’, there are fears this is being taken too literally and people aren’t spending their super in favour of holding onto to it for future generations in a ‘nest egg’ mentality.
“This nest egg mentality includes their super, and is at odds with the purpose of super and its role in the retirement income system. The three-pillared retirement income system (superannuation guarantee, personal savings and social security) is designed for super being spent in retirement, not hoarded,” Fidelity said.
“Almost three in five plan to leave their superannuation savings to their loved ones after they pass away. While three in four acknowledge that money in super is designed to be spent during their retirement, most strongly believe that it’s their money to do what they want with.”
The nest egg idea is particularly problematic as only 14 per cent of survey respondents are very confident they will have enough retirement savings to support their lifestyle in retirement.
Some 14 per cent were very confident and 41 per cent were ‘somewhat confident’. A further 41 per cent said they were not or not at all confident their savings would be sufficient.
However, they still expected to leave as much as 62 per cent of their wealth to their loved ones.
Regarding the recipients of these windfalls, the most popular option for this was for it to be spent on property or paying down a mortgage. Some 26 per cent said they would put it towards their own superannuation.
The latest Intergenerational Report, released in August, found longevity risk is a key concern for retirees in deciding how to draw down their super with most opting to draw down only the minimum drawdown rate.
“This results in many retirees leaving a significant proportion of their balance unspent, for example, a single retiree drawing down at the minimum rates would be expected to still have a quarter of their retirement assets at death,” Fidelity said.
“Most people rely on the government for protection against longevity risk through the age pension, which provides a safety net for retirees who outlive their savings. Well-designed superannuation retirement products can assist retirees to make decisions to help smooth consumption over retirement – aligning income needs with expenditure needs – and draw down on their balances efficiently.”
AUTHOR
Laura Dew
Laura Dew is editor at Super Review. Prior to joining SR, she spent five years working at Investment Week in the UK covering asset and wealth management.
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