(03) 9020 2905SUMMARY: It’s amazing what some solid superannuation returns can do to your mental wellbeing and outlook on life.
Sure, markets have got a little bumpy since November. But the 18-month run prior to that gave superannuation investors an inner-glow.
And, let’s face it, probably an outer-glow too. It can’t not have, can it?
Are you feeling more confident about your financial outlook? Are you feeling more confident now about your financial future than you were, say, a year ago? Have the returns from your SMSF helped you see a few more roses five years into the future?
An interesting survey has looked into that specifically – surveying “seniors” about their outlook on life, with a major focus being on their how happy they are with their finances. And there’s been a significant change over a 13-month period.
The 2nd Seniors Sentiment Survey, completed by National Seniors Australia and fund manager Challenger, was measuring responses on three broad areas – wellbeing in the domains of social, financial and health.
“Seniors” for the survey were over 50 years of age. More than 2000 were interviewed and more than 500 of those were participants in both years the survey has been conducted.
Financially, there was a massive jump in confidence with respect to finances. In 2013, 63% of respondents said they were very or somewhat satisfied with their finances, up 11 percentage points from the survey conducted the previous year.
The timing of the two surveys are really interesting. The initial survey was taken in August 2012. The questions for the second survey were asked in September and October 2013.
In August 2012, when the first survey was done, the stock market run had only just begun. It may well have been another false start. There was certainly nothing to be excited about. The ASX200 had moved from a low of about 4000 points to around the 4300-4400 mark. It was 10% in a short period, but hardly anything to get excited about. It was unlikely anyone had really even bothered to check to see if their super balance had improved.
But by the time they completed the second survey in September/October 2013, the bull-run was nearly 17 months old – and hadn’t slowed down at that time. The ASX200 had moved from that 4000 mark to highs briefly above 5400 points – an increase of 35%. Add in 17 months of dividends and the gains were probably a little north of 40%.
(For the record, property prices nationally were also falling during that period and interest rates on cash was low and falling.)
“Many of the findings are positive, with seniors expressing better health, social wellbeing and financial wellbeing than for the previous survey. In particular, there was an increase in confidence in retirement income, reflecting improving returns in superannuation and consumer sentiment over the period,” the survey’s findings said.
Then drill down directly into superannuation and you find what looks like a straight barometer for the relative health of the stock market during the two points in time the surveys were undertaken.
“Confidence in superannuation as an adequate income source in retirement increased from 44% in 2012 to 61% in 2013 for retired people and from 31% to 37% for non-retired people. Confidence in income from all sources as adequate for retirement rose from 45% to 55% for retired people and 34% to 42% for non-retired people.”
Among the workforce, those for whom super is expected to be the main source of income – presumably those with larger balances – were more confident about superannuation in general.
If super is likely to be your main source of retirement income, confidence levels for overall retirement income adequacy were at 48% (up from 41%), while those who said it would only be “a source” was up from 31% to 37%.
It was a similar story with the retired. Confidence about super for those using it as a main source of income increased from 56% to 71%, while those for whom it was “a source” increased from 44% to 61%.
When it came to confidence that their overall level of retirement income, there were also similar improvements.
For the retired, those feeling very or somewhat confident in the adequacy of their retirement income increased from 45% to 55%.
Amongst the workers, it also increased from 34% to 42%.
It appears the change of government could also have been a factor. As we know, the federal election was held on 7 September, 2013, which saw a change in government from Labor to the Coalition. This survey was undertaken in September and October 2013.
There was a major shift in thinking about the likely effect the Federal Government would have on their financial wellbeing. Very negative sentiment about Federal government policy impacts dropped from 29% to 11%. (At the state level, it also fell, but from 19% to 13%, which was not broken down by state.)
Overall, negative sentiment on the federal government’s likely actions dropped from 62% to 42 (and from 55% to 49% for state governments).
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The survey’s authors did flag that the timing of their questions might have had an impact on the responses. “In the year ended October 2013, the return for superannuation funds was 16.8%.” That will be “balanced” funds.
“It may also be that there has been sufficient time since the shocks of the Global Financial Crisis for seniors to become more confidnt with the adequacy of their retirement savings.”
But most importantly, they pointed out the Westpac-Melbourne Institute consumer confidence survey increased was at 108.3 in October 2013, up from 99.8 a year earlier. When the market started getting jittery in November and December 2013, the consumer sentiment survey quickly retreated to 103.3.
It seems to be amazing what a good bull-run can do to your overall outlook on life.
Financial wellbeing was just one of three major parts of the survey. For the record, there were similar improvements to overall happiness in the other two major areas surveyed – social and health.
Both of those two areas also scored considerable improvements in the gap between surveys. Social wellbeing saw the greatest improvement and was higher than financial, while health was also an improver, though not as strongly as financial.
Does your sociability and your ticker run better with markets in a canter also?
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The information contained in this column should be treated as general advice only. It has not taken anyone’s specific circumstances into account. If you are considering a strategy such as those mentioned here, you are strongly advised to consult your adviser/s, as some of the strategies used in these columns are extremely complex and require high-level technical compliance.
Bruce Brammall is director of Castellan Financial Consulting and the author of Debt Man Walking. E: bruce@castellanfinancial.com.au