The Aussie branch of international consulting firm Mercer recently released new Retirement Readiness Index stats for 2016[i]. This index takes data from all the super funds that Mercer works with through its Retirement Readiness Index platform, to give an overview of whether or not the average Aussie is on track for retirement.
The latest results are not pretty.
Apparently, only 41% of women and 53% of men in the country are on track to achieving a ‘comfortable’ retirement income, as defined by the ASFA Retirement Standard[ii]. This means that less than half of all super fund members overall are putting in enough money regularly (and getting enough returns) to give them a projected finishing balance sufficient to cover the yearly costs of a comfortable lifestyle.
Income level is an obvious part of this. 94% of members earning over $100,000 a year were on their way to a financially secure retirement. But one of the next most important factors is a person’s voluntary contributions. More people who made regular voluntary contributions – more than what their employer paid – were found to be on the right track. But only 16% of Australians made extra contributions on a regular basis. Most contributed only when they had a lump sum to go in, or not at all.
Mercer boss Dr David Knox wrapped up the challenge by pointing out that “The correct investment strategy choice is crucial to ensuring financial security in retirement. Members must also consolidate their accounts and be strongly encouraged to regularly make voluntary contributions.”
In other words, funds need to:
- actively identify underprepared members
- make sure that their members’ choice of superannuation investment risk profile actually reflects their needs and circumstances
- strongly encourage regular voluntary contributions.
“Super funds (need to) play a critical role in (…) encouraging underprepared members to actively take control of their financial future,” said Dr Knox.
Of course, there’s more than one way your fund can make that happened. One of the best ways to reinforce the value of voluntary contributions is holistic online financial education. The right education can help members get their head around the long-term value (and tax effectiveness) of extra super contributions. But it can also help them free up money in their budget to make the contributions they want (and need) to make in order to get back on track.
Find out more about how Money101 can be a core part of your strategy to get your members back on the right track with their contributions. Explore our current titles now.