Study finds a lack of knowledge and interest in superannuation among young

Knowledge of basic facts about superannuation is low among young adults aged 25-34 years old, a new study led by University of Melbourne Law School’s Professor Ian Ramsay has revealed.

The study surveyed nearly 1000 superannuation fund members in the age group, and was undertaken for the Centre for International Finance and Regulation (CIFR). It also found that young adults are largely unengaged by and uninterested in superannuation or retirement planning. 

“Australia’s superannuation scheme is both a massive industry and an important instrument of modern social planning aimed at supporting and sustaining Australia’s increasingly aging and retiring population,” Professor Ramsay says. 

But he says that like the superannuation system itself, superannuation knowledge, behaviour and attitudes among Australians remain immature.

“We chose to study this age group as they have joined the workforce relatively recently compared with older age groups, they are contributing to superannuation, and they are therefore forming views about the importance and value of superannuation – views that will influence their actions in relation to superannuation.”

The study respondents completed a 75- question online survey which collected information regarding their knowledge, behaviour and attitude towards superannuation. The findings showed that knowledge of basic facts about superannuation is low, particularly in relation to age of access to superannuation and the definition of investment options. 

Stronger knowledge scores were seen in male, degree-holding, urban and high income respondents.

“Studying commerce or finance related subjects at secondary school or university had the greatest impact in improving knowledge scores in respondents, which could present an argument for including financial literacy as part of the curriculum for secondary education,” Professor Ramsay says.

The study also found that respondents did not check their accounts regularly or change investment options, and only one third read their periodic statements. A very small number planned for retirement. 

“At the risk of overgeneralising respondent behaviour, young adults appear to be unengaged by and uninterested in their superannuation accounts or retirement. 

“At the same time, their attitudes towards superannuation and retirement planning could best be described as worried and skeptical.

“Only one third consider themselves well informed about superannuation and most are not confident about retirement planning or prospects for retirement itself. These results indicate the need for more education and information about the benefits of superannuation specifically tailored to this age group. Information could also be targeted at those groups the study identified as having lesser knowledge about superannuation, including those in regional areas.

“Government policy is that we should be providing for our retirement rather than relying on the pension. To achieve this objective, superannuation has been made compulsory. Yet our finding of a lack of basic knowledge about superannuation means that at a time when respondents need to make important decisions such as which fund to join and within a fund, what investment option to choose, many are not equipped to make effective decisions. Yet these decisions will have significant consequences for the adequacy of retirement.

“And a lack of engagement with superannuation means that it is less likely for respondents to monitor their superannuation and make changes when this is needed.”

Professor Ramsay says added to these concerns was the fact most respondents overestimated their actual knowledge of superannuation and that only one in five of the respondents said they trusted the superannuation industry. 

“This last finding tells us that the industry itself needs to work harder with this demographic to show how it adds value and to build trust,” he says.

www.law.unimelb.edu.au

www.cifr.edu.au