Australians facing delayed retirement: could a family home be the answer?

New research reveals one in four Australians are considering staying in the workforce longer than planned, as the pandemic continues to cause uncertainty around retirement plans. Young people are problem solving now by looking at options to top up their super, while one worker says the purchase of a family home will be a key part of his plan.

Super fund Colonial First State, which is owned by the Commonwealth Bank, has released the results of a survey* of 2,000 Australian workers carried out amid widespread lockdowns in July.

The results showed about one in four people surveyed (26%) have considered a delay to their retirement and working for longer, particularly among pre-retirees aged 50–64 years (30%).

Colonial First State Superannuation CEO Kelly Power said it showed the repercussions of unemployment and lost savings during the pandemic had “taken a toll” on workers.

The survey also revealed younger workers were looking at ways to top up their super balance, with two thirds (66%) of respondents saying they were positive about the changes introduced on 1 July to increase the Superannuation Guarantee and concessional contribution caps.

“It’s encouraging to see younger Australians are looking to make the most of these super changes, including those looking to rebuild their retirement savings after withdrawing some funds early during the pandemic last year,” Ms Power said.

The super fund’s research showed 30% of workers surveyed said they were planning to contribute additional funds into their super, either via salary sacrifice (20%) or direct after-tax contributions (10%), following the introduction of increased superannuation contributions caps.

Among those looking to increase their contributions, more than half (53%) were aged between 25–44 years, followed by 45–54 year-olds and 55–65 year-olds at 20% each. More than a third (37%) were looking to contribute towards the maximum amount permitted – $27,500 each financial year.

A 48-year-old sole trader in construction noise control, Jay Watson, said super hadn’t been a priority for him while building his business and managing cash flow, but after withdrawing super during the pandemic last year, it was now high on his list to put money back in and see his account balance grow.

He plans to prioritise contributing to his super over the next 10 to 20 years, but in a way that won’t be at the detriment of paying off a mortgage or cash flow to the business. As a sole trader, Mr Watson’s super balance is dependent on him making his own super contributions each year, unlike salaried workers who may choose to make voluntary contributions on top of the compulsory 10% of earnings which their employers are required to pay as part of the Super Guarantee.

Mr Watson told Canstar he and his wife made the decision to pull money out of their super early after weighing up the pros and cons with their financial planner, in a move that would prop up their house deposit, help them get into their first home quicker and avoid having to pay lenders mortgage insurance.

The family’s plan is to buy a house in Perth next year. They are in “saving mode” until then.

Mr Watson said the future purchase of a house was part of their retirement plan as they hope to find a property that would appeal to developers in the future so they could then sell and downsize to a smaller townhouse, and hopefully make a decent return.

The couple is looking at options that would help them keep their mortgage manageable so it won’t be a burden when the time comes to stop working.

“Being older people getting into the market for the first time, we’re not wanting to extend ourselves too much in regards to mortgage exposure. The bank will want to know how we’re going to pay it off when we’re both not working in 20-odd years,” he said.

The release of the Colonial First State survey results coincided with research out of National Australia Bank. It found wellbeing was up for Australians in the second quarter of this year despite rising concern over the virus, but the ability to fund retirement was highlighted as a key detractor for wellbeing, particularly for the unemployed, women, people aged 50–64 and people who work part-time.

*The research was undertaken in July 2021 by Pureprofile with over 2,000 currently employed Australian workers aged 21–65.