Retirees forced back to work

THE huge hit to superannuation savings is forcing some pensioners back into the workforce and making others delay retirement.

Retirees forced back to work

RETIRED people are winding back their pensions, putting off retirement plans and going back to work as big negative returns eat into their investments.

People who made large deposits into superannuation last year to take advantage of the tax-free window and those with modest super accounts have been particularly shocked, say advisers, to see the value of their investments decline.

"People who put big chunks into super before July 1 last year in order to get in before the transitional rules have seen some big losses,'' said Jonathon Bonnett, a financial adviser based on the Gold Coast.

"Some of them are pretty freaked out. If they were in Australian equities they have seen losses of up to 20 per cent.''

MLC's Income Plus Australian Shares investment option has lost 22 per cent in the year to June 30, according to Superratings.

Faye Darling, 72, of Sunnybank, has been retired for more than six years with a modest super pension and a part-pension from Centrelink.

Mrs Darling's super has been decimated in the past 12 months.

"When this trouble on the markets first started, I had $235,000 in super and I was drawing a pension of $1500 per fortnight,'' Mrs Darling said.

"That has gone down to $170,000 and I am advised that the pension I draw may have to be scaled right back.'' Mrs Darling has done very well from her super savings over the past few years. She has worked occasionally and seen some impressive returns.

"When I retired at age 66, six years ago, I had $95,000 saved up in super. Over six years that had built right up to $235,000.''

Mrs Darling's money is invested in a balanced portfolio of assets, but 60 per cent is in Australian and international shares. Thirty per cent is in cash and fixed interest, while 10 per cent is in property.

Listed property and shares have been particularly hard-hit by recent market downturns.

Many people are visiting financial advisers to seek answers as their savings disappear.

"Some are pulling back on pension draw-downs and I have counselled against retiring at this time to a few people until their retirement savings come back to a level that we think is sustainable for income they need,'' Mr Bonnett said.

"Psychologically these things are tough on people who haven't paid much attention to their super. For people who have focused on it for a while, they know it's not such a big deal, markets will recover.

People who haven't paid much attention to their super and perhaps don't really have enough are really freaking out.''

Another financial adviser from the Gold Coast, who did not want to be named, said he had several clients recently come to see him because they had lost out investing their super into MFS/Octaviar.

"They are going back to work now,'' he said.

Fiona Reynolds, chief executive of the Australian Institute of Superannuation Trustees, said it was important for people not to make snap decisions based on one year's performance figures.

"It is important to remember that super is a long-term investment that has returned over 11 per cent for the last five years,'' Ms Reynolds said. "One dollar in super back then is $1.60 now, down from $1.70 last year, but still well ahead.

"If people are really concerned, they need to make informed decisions and get independent advice.''

Ms Reynolds conceded getting independent advice could be difficult.

Mrs Darling claimed the advisers she was sent to when she retired were still taking big commissions from her falling super balance.

"They seem to be taking almost $400 per month from my super in fees and charges,'' she said.

Deen Sanders, deputy chief executive of the Financial Planners Association, said members of that association were required to separate fees for advice from fees from products.

"Financial planners have for too long been blamed for all the failures and troubles in financial services and this has got to stop,'' Mr Sanders said.

"We have a Remuneration Committee looking into definitions, payments and benefits, and we will bring all of this work to the (government) review.''

The Government has announced a review of the super system, including the fees, charges and commissions paid by many retail super funds. Meanwhile, people trying to live off their accumulated savings need to hang on tight for a roller-coaster ride.

People who move their money now could crystallise their losses, Ms Reynolds said.

"Timing the market is very difficult to do, so in a lot of cases the best thing to do is to sit tight,'' she said.