Cost of living hits super saving goals

Increasing living costs have impacted on retirement savings, an MLC white paper has found.


By Elizabeth Somerville

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Helping more Australians save for their retirement should be a national priority supported by the superannuation industry, employers and financial planners, according to a recent report.

MLC’s "Australia Today" white paper, which was based on a survey of more than 2000 Australians on their financial and social lives, revealed most people believed the cost of living had escalated over the past 10 years, making it more difficult to save.

Nearly half the respondents said they were living "pay cheque to pay cheque" and 85 per cent felt they were living beyond their means.

“It’s true that people are struggling a lot more now than they were in the past as the cost of living has gone up and people have a different standard of living now than they did previously,” National Australia Bank senior financial planner Sharon Walker told financialobserver.

“A lot of people don’t think about a lot of little luxuries they purchase [such as daily takeaway coffees and lunches] and the impact this can have on retirement.

“If they put this into savings, it could make a big difference over time as with the compounding in super it can save them a lot.”

Walker said financial advisers needed to be proactive in educating consumers about the benefits of retirement planning, which included helping them to budget and set goals for retirement.

“Education is the key; we need to get that message out there and we need to get stability in superannuation,” she said.

“People do not trust super as they don’t understand it and [also] because it gets changed so often.

“We need to be proactive as financial planners to educate people in our own circles, rather than waiting for people to come to us.”

The survey found two-thirds of respondents identified as middle class or lower middle class, with only 7 per cent identifying as upper middle class, and none identifying as upper class.

NAB Wealth group executive and MLC chief executive Andrew Hagger said: “It is clear that Australians’ perceptions of what the ‘middle class’ is has changed dramatically from 20 or 30 years ago.

“But while we have changed our spending patterns, have we also changed our savings patterns? Is the current super system helping Australians achieve the standard of living they aspire to in retirement?

“This research also tells us that many Australians are looking to government for the answers, with nearly half of those surveyed believing the government should do more to help middle class families.”

But when the government made regular changes to super, people were less inclined to contribute as much, Hagger said.

“Super is a long-term product that needs stable policy,” he said.

“The stakes are high. When we get super right, it helps Australians in retirement and helps our economy. When we get it wrong, we risk our future prosperity.”

He said a key priority should be to establish a clear objective for the super system, “one that all future reforms can be focused on supporting".

“Any reform must maximise the retirement outcomes of Australians in the future – across generations.”

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