Australians support compulsory retirement savings but almost one third have no confidence they will have enough retirement savings, according to research released by the Australian Treasury this week.
Minister for Financial Services and Assistant Treasurer Bill Shorten announced the public release of the research, saying: “This research underscores the need for the Government’s wide-ranging reforms to boost Australians’ retirement savings, a cornerstone of which is increasing the superannuation guarantee from 9 per cent to 12 per cent.”
“While the research indicates that attitudes to super are mostly positive, it also highlights that consumers generally find information about superannuation to be confusing, too complex and full of impenetrable technical language. This is why I am pushing ahead with our election commitments to make Australia’s superannuation system even easier and more user-friendly for consumers,” Minister Shorten said.
The research, while largely geared around consumer attitudes towards superannuation, provides some interesting insights for insurance advisers.
Confusion over value and cost of insurance
Insurance is considered one of the components which creates confusion among consumers because of the way it is presented
According to the research there is a general lack of understanding from consumers regarding the specific fees charged within a superannuation account, and exactly what these fees cover. Insurance is considered one of the components which creates confusion among consumers because of the way it is presented:
“The use of terms such as “units” makes the information provided in the annual statements less meaningful. It is not uncommon for consumers to be unsure whether life insurance is embedded in their superannuation account or of the cost implications of embedded insurance.” *
Older consumers are more financially savvy
The research found that older consumers are more likely to have taken an active step to increase their insurance within their superannuation.
Participants who were aged over 45 were generally aware of the costs of insurance and had made comparisons between having insurance through their superannuation or having it separately. The research also showed that this group had a high level of awareness of the extent of the benefits in the event of death or disability.
Most of the 18-29 year-olds who were surveyed were aware that life insurance was usually an option within superannuation, but the report found that few were aware of the insurance arrangements within their own plans.
More highlights
The research also found that:
- Sole traders and contractors had a high awareness of life insurance and two-thirds of this segment had some form of life insurance (either inside or outside super)
- Employers generally agreed that the provision of insurance within the default superannuation fund was appropriate, especially given the perceived lack of engagement with the investment options by employees
- Most SMSF trustees do not have any separate life insurance and consider the fund to be sufficient insurance for any dependents who outlive them.
The research was conducted in 2009 and 2010. It involved 16 focus groups, 52 in-depth interviews and over 2400 telephone interviews of consumers, employers and stakeholders.
Click here to view the research reports.
(*1.11 Fees, Charges and Commissions, Understanding Superannuation Preliminary Report: Qualitative Investigation with Employers, Consumers & Industry, 25 March 2010.)
