One-third of Australian retirees are still paying off their mortgages, says CEO
The Senate Committee heard arguments against using superannuation for housing and issues with claiming super and insurance.
Alexandar Hassall, co-founder and CEO of Your Financial Wellness, informed the Committee that about a third of Australians nearing retirement age, particularly around 60, are still paying off their mortgages.
During a presentation to the Senate Economics References Committee, Hassall emphasized that only 17 percent of individuals over 70 have managed to fully pay off their mortgages and utilize their retirement savings for financial independence.
Better Money Skills Needed As Millions Prepare for Retirement
With over 2.5 million workers set to retire in the next decade, experts highlighted the urgent need for improved financial literacy. This is crucial as Australia faces its largest wealth transfer between generations.
Hassall pointed out that 40 percent of Australians lack a full understanding of how inflation affects their savings, and less than half comprehend the significance of diversifying investments.
“To enhance financial literacy to the level it deserves in everyday life, we recommend a government-funded campaign inspired by successful public health initiatives,” he proposed.
The Committee also discussed the need for enhanced protection for retirees, including financial information standards and educational programs in schools for future generations.
Arguments Against Using Super for Housing
Many representatives argued that utilizing superannuation for housing was inappropriate.
Superannuation lawyer Michelle Levy from Allens told the Committee that the key solution lies in increasing housing supply to meet demand.
“Expecting the superannuation system to address housing affordability is placing undue burden, when the most effective solution is to focus on constructing more homes in various types and locations,” Levy emphasized.
Blake Briggs, CEO of the Financial Services Council, supported this perspective, stating, “Superannuation funds are being stretched too thin. Our research suggests that incorporating aged care into existing life policies could significantly reduce superannuation balances by over 20 percent.”
“The complexity of these tasks poses increased risks for fund members, underscoring the necessity for a simpler and more manageable approach,” Levy added.
Slow Claims Processing Concerns
Complaints about delays in insurance and superannuation claims have reached record levels.
The Australian Financial Complaints Authority (AFCA) reported a 136 percent surge in complaints regarding claims processing delays in 2022-23, a trend that persisted into 2023-24.
Xavier O’Halloran from Super Consumer Australia disclosed that internal disputes over death and Total Permanent Disability (TPD) claims exceeded ASIC’s 45-day limit, with 20 percent of TPD claims surpassing the six-month resolution timeframe in 2023.
Furthermore, nearly one in five income protection claims took longer than the promised two months to resolve.
“There are cases of individuals experiencing challenges with claim processes, emphasizing the need for insurers and super funds to streamline their customer service and claims handling for better member support,” O’Halloran informed the Committee.
