A fifth of retirees spending super at 'unsustainable' levels

Many self-funded retirees could be at risk of outliving their super savings.

About 20 per cent of self-funded retirees are withdrawing more of their superannuation than is sustainable and as many as one in 10 will outlive their savings, Australia-first research shows.

The Actuaries Institute recently released two major studies, one by the CSIRO and the other by a private research firm, which drew on data from super accounts worth $12 billion, along with detailed Australian Taxation Office and Centrelink figures.

The Federal Government forces people taking their superannuation as a pension to draw down on their super so that the tax-advantaged money is used to support retirement rather than being stored away for inheritances.

Minimum drawn-down rates are based on age and range from 4 per cent for under-65s to 7 per cent or more for those aged over 80.

But an analysis of data supplied by some of the nation's biggest super providers shows that, over the past decade, half of accounts were being drawn down at above minimum rates, which makes them either unsustainable or at risk of being unsustainable.

Of those drawing more than the minimum but less than 10 per cent, a third were drawing 6 per cent or less and two-thirds between 6 and 10 per cent.

Only 1 per cent of accounts had draw-down rates of more than 24 per cent.

Anthony Asher, convener of the retirement incomes working group of the Actuaries Institute, predicted that between 5 and 10 per cent of superannuants would exhaust their savings and have to fall back on the Age Pension.

This proportion would rise as people lived longer.

"The data confirms research from other sources that a significant minority of retirees have, in recent years, run out of retirement savings before death," Professor Asher said.

"It's a relatively small proportion but you're talking about 2.5 million retirees so even 10 per cent is 250,000 people," he said.

The drawdown behaviour of retirees did not vary significantly according to the type of super account held. That is, people in retail, industry, corporate and self-managed super behaved fairly similarly. Nor did balance size appear to affect people's decision-making on how much to withdraw.

The next step was to find out why some people outlived their savings, Professor Asher said.

"It could be intentional and a natural step as their income needs decline [and] the Age Pension is sufficient at older ages," he said.

"On the other hand, they may have lost money due to dementia, financial abuse of some kind or poor decision making."



This article was originally published by the Australian Financial Review on 27 July 2016. It represents the views of the author only and does not necessarily reflect the views of AMP.

Managing your money in retirement

Our online education module will provide you with some general information around how you can manage money day-to-day and long term.

Try it now

News&insights

Want to keep up to date with the latest news?

Subscribe now

Explore your goals

Try our online tool to explore, prioritise and create your own goals timeline.

Start exploring

Subscribe to News&insights for a chance to win one of three iPhone 7's

Subscribe now

Recommended articles

Important information

Show more

© AMP Life Limited. This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.