Fearless Conversations: As superannuation shrinks and retirement savings plummet, crypto isn’t a super idea

The inflation crunch and collapse in super values is horrible timing for South Aussies aged over 60 – but is chasing cash with high-risk investments such as crypto the answer?

Worries about women’s super and weak investment markets are two of the biggest issues concerning Australians saving for retirement.

And people who recently retired are suffering the most as their nest eggs shrink before they get a chance to spend them.

Sharp falls in stockmarkets, property and fixed interest assets this year have put balanced super funds on track for a negative 5 per cent annual return, or worse.

UniSuper state manager Tristan Barnes his fund was seeing the most concern coming from new retirees.

“Timing has not been great for people retiring now,” Mr Barnes said.

Heavy losses in the early years of retirement can reduce the benefits of compound interest over time because the starting balance is lower.

“So a retiree who’s retiring now who’s seen quite a dip in superannuation is having a pretty negative event early in their financial trajectory,” Mr Barnes said.

Younger workers were apathetic towards super and actually benefited from market falls because “they’re buying low and regularly”, he said.

Another topic raised at the Flinders University and The Advertiser Fearless Conversations Forum, focusing on financial security, was the superannuation gap – with women retiring with 60 per cent of the super as men. This problem is compounded by women having longer lifespans and needing their nest eggs to go further.

Flinders University senior accounting lecturer Dr Michelle Yeong said the gender pay gap in some professions was a global issue impacting women’s super balances.

“It’s not something that easy to solve, because if it is someone would have done that,” she said.

Women taking on family responsibilities meant making sacrifices such as a gap in their career, Dr Yeong said.

“When you have a career gap, you are losing out on your super and by the end during retirement you do not have as much,” she said.

Mr Barnes said the problem would not be solved by government policy but by couples consciously correcting the imbalance by shifting super from one partner to the other.

This strategy was “quite easy” for advisers and super funds to do, he said.

“For singles, it’s tough, and we’re still trying to solve this problem.

“It’s a very difficult one – particularly young mothers who may have gone through marriage dissolution and they’re on their own raising the kids. That’s a hard one.”

The question of whether retirees receive too many generous tax breaks was raised at the forum,

“Baby Boomers have only been doing what’s within the rules,” Mr Barnes said.

“So I don’t think we should target them as the issue.”

Mr Barnes said rules had already tightened for super savers, who could now inject $27,500 of tax-deductible contributions into super each year, down from $100,000 several years ago.

“The trend is going that way anyway, so as super builds critical mass I would expect – particularly with a Labour government – that it will naturally unwind itself,” he said.

DOES CRYPTO HAVE A FUTURE?

The idea of cryptocurrency replacing traditional banking increasingly appears an impossible dream, Fearless Conversations panellists say.

They say the recent collapse of bitcoin and other cryptocurrencies, combined with central banks producing their own digital currencies, show that crypto is a gamble.

Flinders University senior accounting lecturer Dr Michelle Yeong said crypto came about because people were “not very happy with traditional banks” and wanted to decentralise finance.

“The reason for the collapse is many people who jumped into this bitcoin craze do not understand, and treat it as a speculative asset,” she said.

Australia could have its own digital currency, but it would be controlled by our Reserve Bank, Dr Yeong said.

Bendigo and Adelaide Bank chief economist David Robertson too much emphasis had been put on bitcoin as a trading tool and not enough on the blockchain technology that underpinned it.

The idea crypto may replace traditional currency is looking less likely. Picture: Justin Tallis / AFP

Blockchain delivered “wonderful applications” such as smart contracts, and would be behind some big future inventions, he said.

“Crypto is a highly-speculative asset class and I’m not even sure it’s an asset class – it’s just a highly-speculative proposition,” Mr Robertson said.

UniSuper state manager Tristan Barnes looked at crypto through the lens of the Pareto principle in finance and nature in which 80 per cent of wealth always ended up in 20 per cent of the population.

“Money, no matter how you distribute it, will always find its way back up to only a few hands,” he said.

“And even if you dosh it out again, it’ll always find its way up.

“The whole concept of socialisation of finance – I worry potentially that will end up with only a few people controlling everything. Look at social media. That’s one of those classic cases where it’s about giving everyone a voice, but what we’ve got Twitter and we’ve got Meta (Facebook) and that’s about it.”

Milestone Project Management director Nick Peacock said he had previously bought and sold bitcoin.

“You hear a lot around a lot of conversations about when it’s going well, and right now I’m hearing nothing,” he said.

WEATHERING THE STORM

In a world of $12 lettuces, surging fuel costs, mortgage interest rate rises and increasing economic uncertainty, South Australians are being urged to remain positive, resilient and expect the financial pain to pass.

Finance leaders say the challenging conditions we see today “have happened before”, Australia’s rising inflation is not as severe as in other countries, banks are still lending money, and interest rate rises often sound worse than they are – only delaying people’s plans rather than destroying them.

They were speaking at The Flinders University and The Advertiser Fearless Conversations Forum, focusing on financial security and the fifth in the 2022 series of roundtable discussions about key issues facing South Australia.

Bendigo and Adelaide Bank chief economist David Robertson said it was easy to be concerned about the economic outlook and think “how are we going to cope with higher interest rates and how are we going to cope with inflation building?”.

But no other economy in the world was better equipped to handle the problems, he said.

“There are going to be some challenges, but I’d rather be dealing with them here than anywhere else and I can think of.”

Flinders University senior accounting lecturer Dr Michelle Yeong said there was a lot to be positive about living in Australia.

“Even though right now it’s stormy weather, stay positive, stay resilient, be educated and have a financial health check,” she said.

“If people are much more informed about their financial condition, products or services, they are much more confident to make the right decision.”

Milestone Project Management director Nick Peacock said SA was “not a bad place to be”, helped by a solid property market that did not have the fluctuations of eastern capitals such as Sydney.

Mr Peacock said interstate buyer interest in SA real estate should help cushion the state from heavy property price falls caused by fast-rising interest rates.

“A lot of developers from Melbourne and Sydney are coming over here and looking at us as undervalued,” he said.

UniSuper state manager Tristan Barnes said it was vital to focus on strengthening marriages and other personal relationships in uncertain economic times.

“We need to spend time looking after them because that’s what gets tested when there’s financial pressure – that can actually cause dissolution of very long-term relationships.”