The retirement landscape is constantly developing and evolving, which can make planning difficult.
It is important to take note of some of the trends to forecast what may happen in the future. The Actuaries Institute noted some very significant trends in its Options for an Improved and Integrated System of Retirement green paper. Below are some of the key trends redefining retirement.
1. Loss of confidence and trust
The royal commission into the banking and finance sector has had a significant impact on the way retirees view financial institutions and their superannuation. Increased complexity in the rules regarding super and the Age Pension have also eroded confidence in the system and made it harder for those trying to plan their retirement.
2. Reduced home ownership
More people in Australia are entering retirement as renters and this is something that is forecast to continue as home ownership proves elusive for many. According to the Actuaries Institute report, this is creating a two-tiered retirement system.
“The needs of retirees who rent are very different from those who own a home, given the vast difference in regular expenses on basic needs,” the paper explains.
“Single pensioners who rent in the private market are poorly served by current arrangements.”
The Centre of Excellence in Population Ageing Research (CEPAR) believes that 60–70 per cent of older single people who rent private housing live in poverty.
“Those retirees who own their home are in a more advantageous position than those in previous decades. Due to the long-term growth in property prices, the value of the home has far outgrown the value of many other assets,” the Actuaries Institute explains.
“Furthermore, those retirees who own their own home increasingly do so with a mortgage at the time of retirement. This proportion has been increasing over time, from 23 per cent in 2006 to 36 per cent in 2016 for those aged 60-64 years.”
3. Increased life expectancy
Life expectancy has continued to improve over the years and, just as importantly, so has health expectancy, meaning that many retirees are not only expecting to live longer, but be healthy and energetic for longer. This means that they will need their retirement funds to last a lot longer than previous generations of retirees. The fact that they will remain active for longer also means that they will require more funds to stay entertained and active in the early years of retirement. Retirees are expected to plan to live well into their mid to late-80s or beyond.
4. Less reliance on the Age Pension
The proportion of retirees receivingthe full Age Pension has reduced significantly over the past 20 years, and the number of retirees not receiving any pension has also grown.
“Over coming decades, a smaller proportion of the aged population is expected to receive the Age Pension as income support,” the Actuaries Institute paper explains.
This is due to a combination of the superannuation system maturing, raising the Age Pension eligibility age and recent changes to the means test.
“The proportion of the eligible population receiving the Age Pension is projected to continue to fall from around 68 per cent in 2018 to around 57 per cent in 2038.
“This fall is comprised of a significant fall in the proportion of the eligible population receiving the full rate of Age Pension (from 42 per cent in 2018 to 29 per cent in 2038) and a relatively smaller increase in the proportion of the population receiving a part-rate Age Pension (from around 25 per cent in 2018 to 28 per cent in 2038).”
Do you think those approaching retirement will be better or worse off than those that have already retired? What retirement trends have you noticed?
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