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Retirement planning is too complex, CHOICE survey reveals

New research shows Australia's retirement system lacks cohesion.

older_man_calculating_numbers_for_retirement
Last updated: 05 March 2020

Need to know

  • Most people believe planning for retirement and accessing the pension is complicated
  • The most common source of advice on retirement planning is super funds, which can be unreliable

If you're worried about whether you'll have enough money for retirement, you're not alone. 

In a recent survey conducted by CHOICE, 61% of respondents say they don't believe their retirement will be financially stress-free. 

More than 10,000 people responded to our survey about their expectations and experiences. The results formed part of Super Consumers Australia's submission to an independent review of the retirement system.

Women especially disadvantaged at retirement

Many women in particular were concerned about retirement because of their typically lower super balances. This has long been recognised as an inequality in the super system. Those who take time out of the workforce or do part-time work to care for family members or raise children enter retirement with much lower super balances on average. 

"When my children were small I worked part-time, so when we separated my ex-husband had about twice as much super as me," says Jayne. "I know there has been some discussion about increasing super for women, but I don't think any measures have been aimed at women my age."

Women are disadvantaged because they take time out of the workforce to do the work of society

Carol*, survey respondent

"Women are disadvantaged because they take time out of the workforce to do the work of society – raising children and taking care of elderly parents. I did both those things as a single-parent income earner," says Carol*. "When women take time out of the workforce to raise children or care for elderly relatives, there should be a system which continues to pay them superannuation."

To move towards addressing this issue, Super Consumers Australia has recommended the government's retirement income review look into the feasibility of making superannuation payable to those who take parental leave.

People who'll be renting or paying a mortgage into retirement also had a common concern. This group expected to experience a lower standard of living once they stopped working.

Australia's retirement system 'difficult to comprehend'

One clear message from the survey is that many people find retirement planning complicated. 

An overwhelming 83% of those who haven't yet retired say they find planning for retirement 'moderately', 'very' or 'extremely' complicated, and 80% find the age pension complicated.

People who've already retired didn't have an easy time of it either, with a sizeable majority reporting that planning for retirement and accessing the pension was a complicated process.

Many respondents have difficulty understanding how different parts of the retirement system (including super, pensions, savings and tax) fit together. Importing savings from other countries is another complication for some.

It's such a relief not to not have to deal with Centrelink anymore

Toni, survey respondent

"The retirement system is complicated, complex and difficult to comprehend," says Adam, who's approaching retirement age. "Having lived [in Australia] for 32 years, I'm still confused … It's difficult to know what rights I have as a retiree."

Centrelink provides a range of resources for Australians to help plan their retirement. But some people are unsatisfied with the service they got from the department.

Toni, a 72-year-old who has been self-employed for four decades, says the department wasn't easy to deal with. "It was very stressful dealing with the system," she says. "It's such a relief to not have to deal with Centrelink anymore."

"Applying for the age pension is a complicated process," says Alisson*, an Australian of retirement age. "I feel sorry for people who lack the literacy and skills to navigate the Centrelink system."

Australians get conflicted advice about retirement

The 2020 survey found the most common resources for retirement planning were those provided by super funds. These ranked ahead of financial advisers, Centrelink, personal finance sites and accountants.

This is concerning, given 2019 research from the Australian Securities and Investment Commission (ASIC) found the advice super funds give their customers is often lacking.

Less than half of the superannuation fund advice ASIC analysed fully complied with the 'best interests' test and related obligations. This means the funds were placing their own interests ahead of members' needs.

"Despite the Hayne royal commission findings, conflicts are still rife in financial advice," says Super Consumers Australia director, Xavier O'Halloran. 

"At the moment, too many people are relying on conflicted advice to help manage their retirement savings."

The whole issue makes me quite anxious

Super funds may also provide more general resources for people to plan their retirement, but again these could be in the interests of the fund. 

Many who completed the survey reflected on the uncertainty they felt around planning for retirement. 

"My partner and I are unemployed or work casually, so there is no information from current employers in regards to retirement," says Jordan*. "We have savings to get the kids through school, but I'm unsure what will happen after that. The whole issue makes me quite anxious."

Independent advice needed 

In light of the lack of independent retirement planning advice available to consumers, Super Consumers Australia is advocating that the retirement income review look into the advice model that operates in the UK.

The UK model offers a 'one-stop shop' which can be accessed by phone or web chat. The independent service can give people advice on a range of money issues, including pensions.

Retirement for me is no retirement at all

Ivan, survey respondent

This service aims to provide personal advice to 290,000 people and reach more than 200,000 others with its online information services.

Previous research by CHOICE found there was a "need for a trusted adviser with no self-interest" that could "help people make decisions quickly and easily". This would be particularly beneficial for those approaching retirement.

Some retirees felt they would have benefited greatly from access to more useful retirement planning resources along the way.

"Retirement for me is no retirement at all," Ivan lamented. "I think we could have done better with planning."

*Not their real name

This content was produced by Super Consumers Australia which is an independent, nonprofit consumer organisation partnering with CHOICE to advance and protect the interests of people in the Australian superannuation system.