SMSFundamentals | Nov 29 2023
SMSFundamentals is an ongoing feature series dedicated to providing SMSF trustees with valuable news, investment ideas and services, in line with SMSF requirements and obligations.
For an introduction and story archive please visit FNArena's SMSFundamentals section on the website.
Inflation Beats Covid, Markets As Retirement Influencer
-General confidence among soon-to-be retirees has reduced due to inflation
-Direct consequences include postponing retirement and more conservative investment strategies
-Trends witnessed in Australia mirror those in the USA, Canada, and the UK
By Rudi Filapek-Vandyck
Inflation, rather than volatile market conditions, has forced Australians into rethinking their retirement plans, with nearly two-thirds of respondents to a survey conducted on behalf of MFS Investment Management indicating they need to save more than previously planned.
The survey also suggests 61% of respondents thinks they need to work for longer while 40% no longer sees themselves as retiring at all. Little surprise thus, some 54% has opted for a more conservative investment approach. According to MFS, results from the Australian survey (1000 participants) are in lockstep with surveys conducted in the USA, Canada, and the UK.
The 2023 MFS Global Defined Contribution Survey revealed the effects of inflation have had a greater impact on general retirement confidence than the market events of the past three years, including the global covid pandemic, with 35% citing the latter as among the reasons for no longer believing they will ever retire.
Only 26% of local respondents are confident they will be able to retire at the time and age of their choosing.
The survey suggests the age Australians expect to retire remains unchanged at 66 years, though most respondents (68%) are now envisioning a more gradual transition in which they reduce hours or switch jobs. Some 15% are expecting a hard stop as they cease working for a salary.
The survey also suggests Australians want in-person advice and online support for retirement saving and planning, with 36% of respondents consulting family and friends for advice on these matters; 28% turned to their employer to find an advisor.
In terms of preferred advice delivery, 33% want in-person or video contact with a human advisor, though there is increasing interest in online financial publications, videos, and podcasts. Responses also show pure robo-advice is struggling for traction at 5%. 13% of respondents are not interested in any form of advice.
Another survey outcome is Australians are still interested in seeing more ESG investments offered in their retirement plans, but demand has reduced to 76% from 81% in 2022. Equally noteworthy: ESG demand continues to be inversely correlated with age, with most demand being driven by millennials.
The latter is yet again in line with the global trend, reports MFS.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
FNArena is proud about its track record and past achievements: Ten Years On
