Health, redundancy force workers into unwelcome retirement: CFS report

Just one in three Australians retire on their own terms, with most pushed out of the workforce due to health issues or redundancy, according to a new survey.

A report from Colonial First State shows most Australians don’t get to retire on their own terms.

Just one in three Australians retire on their own terms, with most pushed out of the workforce due to health issues or redundancy, according to a new survey from Colonial First State.

And a majority of workers – more than two-thirds – don’t want to fully step back from working life but instead want to take a more flexible, hybrid approach that sees them work less or in a less demanding role.

Even with this uncertainty looming over them, Australians have big ambitions for their retirement nest egg, with the average worker believing they need $1.6m in superannuation to retire comfortably. Among the unadvised, the magic number is even higher, at $2m, the Rethinking Retirement report shows.

Both figures are substantially higher than what the Association of Superannuation Funds of Australia (ASFA) says is needed to have a comfortable retirement. According to ASFA, singles need about $595,000 in retirement savings, while couples need $690,000.

While the average worker’s ambition for their nest egg is more than double what ASFA estimates is needed, there is an even greater mismatch when it comes to what workers actually have in their super accounts: the average superannuation balance sits at just $170,000, according to the latest figures from the Australian Taxation Office, dating from the 2021 financial year.

Balances vary from cohort to cohort but for those closer to retirement age, in the 60 to 64 year old group, the ATO puts the average for men at $402,838 (with a median of $211,996) and for women at $318,203 (with a median of $158,806).

The findings from the report show the need for financial advice in planning for retirement, according to the chief executive of Colonial First State Superannuation, Kelly Power.

“When we think about retirement, it’s always as working towards this (end) point, but actually, it doesn’t really work like that,” Ms Power told The Australian. Australians receiving financial advice are better prepared for retirement both financially and mentally, she added.

“(Advised Australians are) about twice as likely to retire at their time of choosing, but also their understanding of how much money they need and how to manage that money (is better),” she said.

According to the report, 35 per cent of Australians retire due to their own or their partner’s poor health, while 33 per cent retire at a time of their own choosing and 11 per cent due to redundancy.

Unadvised workers have a much greater sense of insecurity and concern in the lead-up to retirement, in part because they don’t know how much they’ll need to have saved to live out their later years, Ms Power said.

But this insecurity tended to lessen in retirement, she noted.

“Typically they learn how to manage the amount of money they have and feel quite comfortable, spend a little bit here and there. It’s just about that sense of certainty and preparedness in the lead-up (to retirement).”

The federal government is currently consulting on improving consumer access to advice, including allowing super funds to provide financial advice to members.

Allowing super funds to provide qualified financial advice would open up access to those who needed it most, Ms Power said.

“The people that need advice most are those that have less (funds) in the lead-up to retirement.

“One of the best things that they can do is look to pay down debt or look to optimise their age pension entitlements,” she said.

“And so when you think about who can actually get advice versus who needs advice, and you think about the complexity of navigating moving into retirement, it is a real problem.”

Originally published as Health, redundancy force workers into unwelcome retirement: CFS report