The latest release from the Australian Bureau of Statistics provides valuable insights for superannuation trustees into the retirement plans of Australians.
Superannuation fund trustees need to consider the retirement plans of their members when formulating their retirement income strategies. We often hear from trustees that they don’t have sufficient information. While it is not a replacement for information about their members, the retirement intention statistics is a good starting point.
The Australian Bureau of Statistics (ABS) publish updates every two years, and the 2020-21 edition is hot off the presses. So, what does it tell us about Australian retirees?
Key statistics
In 2020, a total of 140,000 Australians retired, bringing the total number of retirees to 4.1 million. This shift is highlighted in Chart 1 which also illustrates the trend of Australians opting for later retirement. Over the past two decades, the average age at retirement has increased from 53.5 to 64.3 years old.
Looking ahead, a significant cohort of 2.8 million Australians intend to retire within the next 24 years, with a subset of 670,000 individuals planning to do so in the next five years. Notably, these 670,000 aims to retire at between 65 to 66 years of age.
Chart 1: Average age at retirement by year of retirement, 2020-21
Source: ABS Retirement and Retirement Intentions, Australia, 2020-21
Retirement plans versus reality
Many will be familiar with the quote from boxer Mike Tyson: “Everyone has a plan until they get punched in the mouth“. The ABS statistics provide useful insights into Australia’s retirement plans and the reality of our current society.
Financial security is the main factor influencing the decision about when to retire. Other important factors include:
- Personal health or physical abilities
- Reaching the eligibility age for an age pension
- Ability to access superannuation funds
Of the 4.1 million current retirees, 2.7 million retired in the last 20 years. Of these, only 46% left employment for reasons that might come to mind when talking about retirement, such as reaching retirement age (or being eligible for superannuation or pension) or to coincide with a partner’s retirement.
The remaining so-called retirees left their jobs for other reasons, such as:
- Lost last job for economic reasons (retrenched)
- Own sickness, injury or disability
- To care for an ill, disabled, or elderly person
These insights are essential when trustees discuss retirement plans with their members. And while things don’t always go to plan, we should heed Dwight D. Eisenhower, who said, “Plans are worthless, but planning is everything“.
Income in retirement
While the government pension remains the main source of income for most retirees, more people are retiring with superannuation as a source of income. It will come as no surprise that women are financially worse off in retirement than men, with 19% of women having no personal income and 34% relying on their partner’s income to meet their living costs in retirement.
Chart 2: Main source of income at retirement
Source: ABS Retirement and Retirement Intentions, Australia, 2020-21
Other sources of income at retirement include rental property income, dividends or interest and workers’ compensation.
Conclusion
The recent collaborative review by APRA and ASIC of retirement income strategies brought to light the inadequacies in the current offerings provided by trustees. Notably, trustees lack vital data essential for developing effective retirement income strategies. It is imperative that trustees draw on a range of internal and external data sources to gain a comprehensive understanding of the retirement requirements of their members..
While it’s true that relying solely on population data and averages has its limitations, there are reliable sources available that can serve as valuable starting points for trustees in their quest for knowledge about Australian retirees. For instance, the ABS Retirement and Retirement Intentions Statistics discussed in this article along with insights from the Intergenerational Report discussed in our previous article, can be good starting points for trustees to build their knowledge of Australian retirees. These resources can empower trustees to pave the way toward fostering a secure and comfortable retirement for their members.