SILVER TSUNAMI HITS

Australia is about to experience one of the biggest demographic changes the nation has ever seen. Braced for a wave of retirees, the super system will be completely reshaped. Lachlan Colquhoun writes.

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Some time ago David Knox ’s01 father received an insurance payout of around $100,000 and told his family the money was going straight into a term deposit.

“He said the money would be there as funds if he ever needed to go into an aged care home,” says Knox.

“While I could understand the logic of it, I wish he didn’t feel he had to make that kind of decision with those funds.

“This is where we need a much broader perspective of how to fund ourselves later in life and understand that in addition to superannuation the Age Pension is part of the deal, aged care funding is part of the deal, and so is the health system.”

Knox, as a senior partner at Mercer and the firm’s national leader for research and policy, is one of Australia’s foremost experts on superannuation and retirement income, an issue that is looming large for the first generation of Australians who had their working lives in the era of compulsory superannuation and are now of retirement age.

His view is that people need “to have the confidence that it’s reasonable for them to go and spend money,” rather than earmarking certain funds for certain purposes and keeping them there, as in the case of his father, ultimately unspent.

Too many people, he says, are holding on to their superannuation balances because they are either fearful of not having enough money to go into aged care if they have to, or they are using it as “estate planning” and denying themselves the use of their super because they feel they should leave it to their children.

This has been facilitated by the lack of a policy or regulation on how retirement funds should be spent, and a paucity of product and focus from the financial industry.