Australia: Will you end up paying for your parents' retirement?

Generation ‘X’ and younger baby boomers are likely to find themselves funding their parents' retirement lifestyle, unless they actively educate them on the realities of superannuation.

According to the Australian Bureau of Statistics, the median total superannuation balance for people aged between 55 and 69 years is currently just $30,000¹.

For the majority of these soon-to-be retired there is a massive short fall with six out of ten people surveyed estimating the minimum annual retirement income they require will be $30,000 or more.²

“It’s time for the younger generation to talk to mum and dad and get them to see an independent Financial Adviser. It is not too late to get professional help,” said Allan Griffiths, Managing Director of Norwich Union Life.

For the children of many soon-to-be retirees, superannuation has been with them since the start of their working life and they are comfortable with the concept and the need to be financially prepared. This clearly isn’t the case for the older generation that only saw compulsory superannuation contributions introduced in 1985 (under the industrial relations system).

Many people are unaware of what funds they need for retirement and are still relying on employer contributions to their superannuation to fund their retirement. However this will only provide on average $19,000 pa for most of us, assuming we have worked for 30 years³.

“Retirement income can become an issue for the whole family, especially if there is not enough money for the older generation to live comfortably. It is unlikely, that the aged pension or employer superannuation will provide enough money for retirement and if parents are relying on this money then their children will end up helping them out financially,” says Allan.

“It’s time to get organised for retirement now! There are many different methods of structuring individual finances to ensure families are prepared for retirement. One method is to make personal contributions into superannuation and boost savings immediately.”

Research indicates that to receive an income of $40,000 annually for a period of twenty years, retirees need to have in the vicinity of $520,000 to invest.⁴. To achieve this, investors would need to start contributing at least 12 to 15 per cent of their salary in their early working life.⁵.

“Children of retirees can now expect their parents to see their grandchildren grow up. Women have an average life expectancy of 86 years while men are looking at 81 years⁶. For most people this means they will spend about a quarter of their lives in retirement.”

“Of course, this is good news – but can the majority of future retirees afford to be retired for 20 years or more? There are many costs associated with growing older and without a robust financial plan, the next generation will have to foot the bill,” said Allan.

It is important that the younger generation become involved in their parent’s financial plans. One easy step for the children of the soon-to-be retired is to make an appointment for their parents with an independent Financial Adviser, who can help them ensure they are financially prepared for retirement.

¹Australian Bureau of Statistics 2001, Superannuation: Coverage and Financial Characteristics, September 2001 (cat.no 6360.0), ABS, Canberra.
²The Association of Superannuation Funds of Australia Limited, An adequate retirement income, June 2001, Sydney.
³The Association of Superannuation Funds of Australia Limited, $25,000 per annum retirement income must be the goal, June 2001, Sydney.
⁴Norwich Union Australia, Wealth Solutions, February 2002, Melbourne p.9
⁵The Association of Superannuation Funds of Australia Limited, An Adequate Retirement Income?, June 2001
⁶The Association of Superannuation Funds of Australia Limited, An Adequate Retirement Income?, June 2001

Allan Griffiths is available for interview on 0419 307 319.

For further information, please contact:

Simon Morgan
Group General Manager Public Affairs
(03) 9829 8892
0407 966 632

Note to editors:

• Norwich Union Australia is a group of three specialist financial services companies; Navigator, Norwich Union Life and Portfolio Partners. Through these companies we provide products and services in the areas of wealth creation, wealth management and wealth protection for more than 300,000 customers throughout Australia.
• Globally, Norwich Union Australia is part of Aviva plc, the world’s seventh largest insurance group, the largest insurer in the UK and one of the top five life companies in Europe. Aviva was formed in May 2000 through the global merger of CGU plc and Norwich Union plc.
• Aviva’s principal business activities are long-term savings, funds management and general insurance. It has a market capitalisation of approximately A$27 billion at 21/06/02, worldwide premium and investment sales of more than A$72.2 billion from ongoing business and more than A$519 billion in assets under management. The group has 64,000 employees and more than 15.25 million customers.
• Norwich Union Australia has a sister company, CGU Insurance Ltd, a top five general insurance business, which operates independently in Australia.
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