A Third of Retiring Australians Still Paying Their Mortgages: CEO

An Australian 100 dollar note is shown on Oct. 6, 2009. Greg Wood/AFP via Getty Images

A third of Australians reaching retirement age, particularly around 60, are still paying off their mortgage, says Alexandar Hassall, co-founder and CEO of Your Financial Wellness.

Hassall was presenting to the Senate Economics References Committee, which is examining the effectiveness of superannuation and housing in ensuring good retirements for Aussies.

Hassall highlighted that his company’s data showed just 17 percent of people over the age of 70 managed to fully pay off their mortgages, and use their retirement funds to achieve financial freedom.

Better Money Skills Needed As Millions Set to Retire

As Australia prepares for the retirement of over 2.5 million workers in the next decade, experts also stressed to the Committee the need for better financial literacy, which is critical given the country could soon see its largest transfer of wealth between generations.

Hassall noted that 40 percent of Australians do not fully understand the impact of inflation on their savings, and less than half grasped the importance of investment diversification.

“To elevate financial literacy to the level of everyday importance it deserves, we propose a government-funded campaign model.ed after successful public health initiatives,” he said.

The Committee also heard there was a need for better protection for retirees, including standards on financial information, and programs in schools for the future generations.

Arguments Against Super for Housing

Many representatives argued that using superannuation to fund housing was not inappropriate.

Superannuation lawyer, Michelle Levy, who appeared in her own capacity, told the Committee that the primary solution lay in increasing housing supply to meet demand.

“We’re asking the superannuation system to do too much in a situation where the most effective solution for housing affordability is to focus on building more homes of various types in different locations,” Levy stated.

Blake Briggs, CEO of the Financial Services Council, supported this view.

“Superannuation funds are being stretched too thin. Our research indicates that if aged care were added to existing life policies, it could lead to a reduction in superannuation balances of over 20 percent,” he said.

“The complexity of these tasks could lead to greater risks for fund members, highlighting the need for a more straightforward and manageable approach,” Levy added.

Claims Taking Too Long

Complaints about insurance and superannuation claims are also at record highs.

The Australian Financial Complaints Authority (AFCA) reported a 136 percent increase in complaints of delays in handling claims in 2022-23, a trend that has continued into 2023-24.

The average timeframe for internal disputes over death and Total Permanent Disability (TPD) claims has also exceeded the Australian Securities and Investments Commission’s (ASIC) mandated 45-day limit, reported Xavier O’Halloran of Super Consumer Australia.

O’Halloran further revealed that in 2023, 20 percent of TPD claims exceeded the six-month resolution timeframe, violating the insurers’ own code of practice.

Similarly, nearly one in five income protection claims took longer than the promised two months to resolve.

“A woman with a chronic illness, despite being approved for the Disability Support Pension, failed the strict TPD test. Another individual from a culturally diverse background abandoned their claim due to the complexity of the process. These stories underscore the need for insurers and super funds to redesign their customer service and claims processes to better meet members’ needs,” he told the Committee.