Key Financial Issues for

Older Consumers:

Consumer

Perspective

Lifestyle Issues• The adequacy of retirement incomes to support lifestyle

depends on how finances, assets and retirement are planned and managed

• Important considerations include:- What lifestyle do I want and how much will it cost?- How much money do I have?- How long do I need it to last?- Will I work part-time?- Am I eligible for the age pension?- Do I have dependents?

Financial Profile of Seniors

• Australian seniors have considerable economic resources primarily in the form of:

(1) Equity (home ownership)

(2) Savings & Superannuation

Estimated net average value of various assets, per adult aged 65 years and over; 1986 and 1998

Source: Harding, King & Kelly, 2001

Retirement Planning

• Careful asset management and early planning is vital to ensure these resources are maximised to adequately provide for current and future lifestyle.

• Seniors usually plan for their retirement by seeking financial advice.

• Advice about (1) pensions, concessions and benefits, and (2) financial and legal issues are the second and third most sought after types of information by Australian seniors (COTA, 2002)

Why do Australian seniors seek financial information & assistance?

Age of person assisted

65–79 years

80+ years Total

Main reason assistance was required

% of respondents reporting (n = 1259)

Lacks confidence in doing it themselves

37.1 18.7 28.3

Disability/poor health 26.1 28.5 27.2

Old and frail 9.9 32.1 20.6

Dementia/confusion 9.6 13.9 11.7

English not first language 8.4 3.0 5.8

Source: Tilse, Wilson, Setterlund & Rosenman, 2005

What types of information and assistance do

Australian seniors seek?

Age of person assisted

65–79 years (n = 655)

80+ years (n = 604)

Total (n = 1259)

Processes used (multiple responses allowed)

% of respondents reporting

Formal

Enduring Power of Attorney 12.0 19.1 15.4

Guardianship/administration order

0.8 2.0 1.4

Semi-formal

Bank arrangement 14.4 23.3 18.7

Source: Tilse, Wilson, Setterlund & Rosenman, 2005

Age of person assisted

65–79 years (n = 655)

80+ years (n = 604)

Total (n = 1259)

Processes used (multiple responses allowed)

% of respondents reporting

Informal

Paid with own money 45.6 54.2 49.7

Fill in cheque/ withdrawal

13.9 20.4 17.0

Electronically assisted – phone, internet

10.8 10.1 10.5

Use ATM pin number 9.5 10.1 9.8

Source: Tilse, Wilson, Setterlund & Rosenman, 2005

What do Australian seniors value in a financial advice service?Guidelines 'Financial planners should . . . '

Importance to seniors in general (Per cent indicating important or very important)

Relevance to self (Per cent indicating relevant or highly relevant

Highest Discrepancy

Develop a trusting working relationship and treat clients with dignity

96 44 52

Make clients aware of conflicts of interest with other parties

90 44 46

Provide the amount of information the client wants in clear English

94 49 45

Source: Pettigrew, Mizerski & Donovan, 2004

Guidelines 'Financial planners should . . . '

Importance to seniors in general (Per cent indicating important or very important)

Relevance to self (Per cent indicating relevant or highly relevant

Lowest Discrepancy

Provide a history of past performance, including references

87 46 41

Discuss and write down the expectations of both parties

92 55 37

Provide a list of independent contacts, including who to contact if you have any complaints

90 66 24

Source: Pettigrew, Mizerski & Donovan, 2004

National Seniors Policy Superannuation

1. Simplify superannuation and providing more education2. Reduce tax on superannuation to increase incentive 3. Invest and plan early – relying on compulsory superannuation

contributions alone may not be adequate to support lifestyle4. Assist mature age unemployed to get back into the workforce

to avoid premature access of their superannuation5. Streamline access to superannuation funds for medical

expenses, palliative care, and funeral expenses6. Participate in the decision making regarding your

superannuation7. Implement safeguards such as income splitting to protect

women from divorce and devise a way of calculating the value of unpaid work (females have significantly less superannuation than males often because of disrupted work patters (e.g. child care).

National Seniors PolicyHome Equity Conversion

(Reverse Mortgage)Considerations for using home equity as income

for retirement should include:1. Amount of available equity in home to draw2. Years of expected retirement3. No negative equity guarantee 4. Complete loan costs5. Possible future moves6. Plans to pass home on to children7. Impact on age pension8. Other options

National Seniors PolicyAge Pension

• More seniors live alone. However, the single age pension is currently only 60% of the couple’s rate and there is good evidence that this is inadequate

• The single pension should be increased from 60% to two-thirds of the couples pension rate

• Standard poverty lines should be established to ensure the financial well-being of all Australian seniors

Vulnerability to Financial AbuseNational Seniors recommends:- Raising awareness through public education campaigns- Provision of Government funding for the National

Information Centre on Retirement Investments (NICRI)- Use of multiple strategies to disseminate information - Provision of information with sufficient detail to enable

understanding of:- features and benefits of the service,- user’s rights and, - eligibility

ReferencesABS. 2006. Year Book Australia 2006, Cat. No. 1301.0

ABS. 2004, Household Income and Income Distribution Australia 2002-2003, Cat.No. 6523.0.

Chant Link & Associates. 2004. A report for ASIC on consumer decision making at retirement, The Consumer Advisory Panel (ASIC), Sydney.

Council on the Ageing. 2004. ‘Consumers and financial literacy’. Response to Consumer and Financial Literacy Taskforce discussion paper: Australian Consumers and Money, Melbourne, July 2004.

Council on the Ageing. 2002. ‘Superannuation and standards of living in retirement’. Submitted to Senate Select Committee on Superannuation: Inquiry into Standards of Living in Retirement and Factors Contributing to it, Melbourne, May 2002.

Dolan, A., McLean, P. & Roland, D. 2005. ‘Home equity, retirement incomes and family relationships. Canberra: Department of Family and Community Services.

Harding, A., King, A. & Kelly, S. 2001. Trends in assets and incomes of older Australians. Presented to Council of Ageing National Congress, 13 November, old Parliament House, Canberra. Canberra: National Centre for Social and Economic Marketing.

McAlister, D., Lindenmayer, P. & McLean, P. 2005. Three dimensions of retirement – aspirations, expectations and outcomes. Prepared for HILDA Conference, September 29-30, 2005, Melbourne. Canberra: Department of Family and Community Services.

ReferencesNational Seniors Association. 2006. National Seniors Association National Policy Document, Brisbane:

National Seniors Association.

Pettigrew, S., Mizerski, K. & Donovan, R. 2004. Serving seniors better: service guidelines for financial planners. Australasian Journal on Ageing, 23 (3): 139-141.

Quine, S., Bernard, D. & Kendig H. 2005. Understanding baby boomers’ expectations and plans their retirement: findings from a qualitative study. Australasian Journal of Ageing, 25 (3): 145-150.

Quine, S. & Carter, S. 2006. Australian Baby Boomers expectations and plans for their old age. Australasian Journal on Ageing, 25 (1): 3-8.

Rosenman, T. 1999. ‘Not just surviving, but living: policy for income in old age’. Australasian Journal on Ageing 18(4): 38-43.

Setterlund, D., Wilson, J., Tilse, C., Robinson, G. & Rosenman, L. 2003. Financial abuse within families: Views from family members and professionals. Presented for 8th Australian Institute of Family Studies Conference, 12-14 February 2003, Melbourne. Brisbane: University of Queensland.

Sheen, V. 2002. Home equity conversion: getting the policy right and getting the product right for older Australians. Presented to Changing needs, Growing Markets Conference, 18 February, Sydney. Melbourne: Council on the Ageing.

Tilse, C., Wilson, J., Setterlund, D. & Rosenman, L. 2005. Older people’s assets: a contested site. Australasian Journal on Ageing, 24 (Supp.): 51-56.