Hi Acey
Yes, I have mentioned this as a concern a few times.
Over the past month there have been two enquiries published in newspaper columns where questions from people in their fifties have been asked regarding accessing the funds in superannuation to (a) pay for school fees, and (b) pay for a child’s wedding.
These questions would indicate that both families had no other savings except the modest amounts in the superannuation and that each family was eager to obtain access to the funds so that the money could be spent.
Since 1989 compulsory superannuation has created a mindset that ‘it will be right on the night’ – that there will be ‘super’ available for retirement.
My parents worked for Bradmill Industries, one of a handful of employers which introduced a superannuation or pension scheme in about the1960s. I can remember my Mother being anxious about this – the one pound per month paid into the funds from the employer would have gone a long way in a family of six reliant on one wage. But when the working life was over, there was $17,000 in the fund which would not otherwise have been there.
This was a generation which was frugal, kept a close eye on the finances and had careful spending habits. There was no expectation of private schools or fancy weddings and whose main ambition was to pay off the house before retirement and to have no debt. Those who had superannuation had it in the main because they had initiated a superannuation policy themselves and were committed to paying into it with no expectation of accessing those funds until the due date.
Now, the boomers have lost sight of these basic ambitions. Private schools are becoming almost de rigueur for families with any level of income and the type and level of spending has risen dramatically.
Spending has become a way of life. This is not spending on basics such as shoes, but on what would have been considered luxury goods such as holidays (oh, but it’s cheaper to go to Bali than it is to go to Rosebud!) and little consideration is given to ongoing costs such as heating and petrol.
In my opinion, Australia is going to be facing age related poverty such as we have never seen before. Few people have investments of any significant level, few people have savings, and the compulsory nature of superannuation has blinded most people to the need to take some responsibility for themselves.
It doesn’t take much arithmetic to determine that if someone is earning $50,000 per annum in full time work, and has less than, say, $5,000 in savings and has some level of debt – mortgage, personal loan, even a couple of thousand on the credit cards – that they are actually using most of their income for ‘living expenses’. If they have $200,000 in superannuation when they retire, that superannuation will take them only five years to fully expend. Retire at 60, on the pension by 65. What else has changed?
But underlying all this, is the ongoing nature of unpaid debt and / or rent. Whereas a previous generation tried to clear debt before retirement, I don’t believe that this generation intends to do so.
Debt of a personal nature is not to be confused with debt used to gear business or investments. Debt against your own motor vehicle or your own home is simply debt. I would suggest that people living in the less salubrious suburbs, the working class folk, are probably in a stronger position than those in the middle class belt and who have higher expectations.
Perhaps, in as far as retirement in Australia is concerned, it truly will be the meek who shall inherit the earth!
What can be done about this? Not much, I’d say. While there is a mindset that superannuation should be accessible for school fees and weddings I think that the financial awareness of the nation will continue to recede.
As there is not much the individual can do to protect the nation, we may as well take up a pro-active stance and buy plenty of investment units suitable for ‘empty nesters’. After selling the family home for whatever equity there is in it, driving a Winnebago around Australia for six months, and upgrading the family car, there will be only enough left for a new lounge suite to put in the rented villa unit.
I don’t mean to sound cynical. Actually, this concerns me quite a bit. I honestly do not think that many of my peer group realise that their working days are numbered and at the end of maybe fourty or even fifty years of conscientious working there will be no pot of gold at the end of the rainbow.
Perhaps if the Government actually published the Centrelink allowances more openly people would start to see how serious this is.
At $499.70 for an individual per fortnight ($12,992.20 per annum), or $417.20 each for a couple ($21,694.40 per annum) - not including any rent assistance payments, there are not going to be too many lattes or light hearted day trips to while away the next thirty years.
(sigh)
Kristine
