A superannuation crisis of faith

THE shock of losing billions of dollars from super balances has left many people afraid and untrusting.

A superannuation crisis of faith

AUSTRALIANS have taken to superannuation like ducks to water and it's now the largest household asset after the family home.

But the recent shock of losing billions of dollars from super balances has left many people afraid and untrusting.

Superannuation is at a crossroad.

People are now unsure about the future of their retirement and unwilling to pump in too much more money in case it, too, gets wiped out.

Losses

Many Australians did not even realise their retirement nest eggs could lose money, never mind billions of dollars.

During the past year about $200 billion has been wiped off Australian super balances. That translates to about $20,000 for every worker in the average balanced super fund.

For people with 15 or more years remaining in their work life, the losses are expected to be recovered.  However, for many of our large baby boomer generation they do not have this luxury of time.

Delay retirement

According to research by Mercer about 25 per cent of workers over 50 now say they will be forced to delay their retirement until their early 70s.

"For many baby boomers, the impact of recent stock market declines on their superannuation avings means that traditional retirement is not an option.

"They just can't afford to stop working altogether,'' Mercer spokesman David Anderson said.

Instead, they are being forced to consider working several years longer or working part-time during their retirement.

According to the latest Mercer study of superannuation the number of workers who are either "very'' or "extremely'' worried about their superannuation has also doubled during the past six months.

Share market falls

About 21 per cent of people now say they are very worried about share market volatility and its effect on their super. This compared with only 11 per cent six months earlier.

One of the biggest issues to come out of recent surveys and research has been the reliance people put on their employer to provide a good, well-managed super fund.

In reality, that is not always the case. Unfortunately some employers take the easiest, most hassle-free option when nominating a default fund for a workplace.

According to superannuation research companies Chant West and SuperRatings, a worker could lose out on hundreds of thousands of dollars because of a poorly performing super fund.
Most workers do not actively seek out a super fund but automatically accept the fund set up by their employer -- known as the default fund.

"It's no longer enough for employers to just pay a salary and provide traditional benefits,'' Mr Anderson said.

Mercer asked people how their employer could best help them prepare for retirement and the answers that topped the list were financial advice and education about superannuation.

Knock-on effect

"All too often, personal problems such as financial issues have a serious knock-on effect in the workplace,'' Mr Anderson said.

"Many working Australians were surprised by their recent benefit statement -- nearly half found their balance was lower than expected, despite the well publicised financial crisis.''

However, the more knowledge someone had about their super and the workings of financial markets, the more likely their latest statement was in line with expectations.

Although almost every employer recognised the benefits and importance of helping their workers become more informed about superannuation and financial matters, less than one in three actually did anything about it, Mr Anderson said.