Regulator warns super calculators overestimate retirement needs

As many people fret over how much they may need in retirement, an ASIC commissioner says super calculator results are often ‘too high’.

A senior couple planning their finance and paying bills while using a laptop at home. A mature man and woman going through paperwork and working online with a computer; investing superannuation money generic

One of the country’s top regulators has warned people to be wary of superannuation calculators, a common tool used by large super funds to attract consumers.

Alan Kirkland, commissioner at the Australian Securities & Investments Commission, said many calculators promoted by the funds overestimate how much superannuation people will need to retire.

“I think some of [the calculators] are too high for some people’s individual circumstances,” Mr Kirkland told The Australian’s The Money Puzzle podcast.

“A lot depends on individual circumstances and whether the individual owns their own home or not.

“There’s a lot of expenditure that you incur when you’re of working age that just falls away once you retire. And I think some of the calculators don’t adequately factor that in. So some of them do come out with relatively high figures.”

Mr Kirkland also pointed to surveys that showed that many Australians leave substantial amounts of super unspent – in fact some older people never use it at all. A survey by Challenger suggests one in four Australians will die without ever touching their superannuation savings.

“We worry as it makes people unnecessarily distressed around their current super balance, which is why we’re really trying to give people tools that they can trust to help them work out what’s an appropriate figure for them,” he said.

ASIC’s popular Moneysmart service surveyed 3000 people to establish the key issues facing them. The report found the key questions that preoccupy people in the lead-up to retirement include: How much will I need to retire? Will I have enough? Am I on the right track? and How do I make it last?

The amount that is required for a comfortable retirement is generally quoted as $595,000, according to the figures put together by the Association of Superannuation Funds of Australia. Individual estimates across the industry can vary around this universal figure.

But the calculations are openly challenged by other players in the sector. For example, the Optimum Pensions group cites a figure of $480,000.

“The answer is very different depending on what sort of income you’ve been on,” Mr Kirkland said. He said it also depended on “what sort of lifestyle you’re accustomed to and what sort of lifestyle you expect to maintain”.

ASIC commissioner Alan Kirkland. Picture: Jane Dempster

“Your housing situation also makes a big difference,” he said. Whether a person owned their home or not “is probably one of the biggest factors”.

ASIC is also paying significant attention to the intersection of financial advice and superannuation in the wake of the First Guardian and Shield scandals, where an estimated $1bn could be lost as super savers get entangled in the fiasco that has engulfed some of the best known financial groups in Australia.

Macquarie has already refunded any customers caught up in the affair with payouts, totalling $300m.

However, other key players are taking a different approach. Netwealth has asked the government to bail out investors.

Meanwhile, ASIC is taking Equity Trustees to court.

Mr Kirkland said ASIC was seeking court orders that Equity Trustees provide remediation to the customers affected.

“I’ll have to see how that works through the courts, but it demonstrates that that’s one of the key things we’re pursuing,” he said. “We want to do everything we can to stop this happening again. And that involves holding the individuals and the entities to account.”