New research from Allianz Retire+ has revealed that one-third of prospective retirees now have more negative expectations of their retirement than they did pre-COVID-19.

With around 40 per cent of prospective retirees conceding they have already lost money during COVID-19, a further one in five has already seen a change in their employment status, or expect one to still come.

Calling falling retirement savings and rising job insecurity “a toxic combination”, Allianz Retire+ also revealed that 77 per cent of prospective retirees do not believe superannuation will provide them with enough money in retirement.

While Australia’s superannuation system is lauded as one of the best systems globally, Allianz Retire+ CEO Matt Rady said it’s “not working for a great deal of the people it’s designed for”.

“COVID-19’s impact has exposed shortcomings in retirement product design, access to financial advice and superannuation education,” he said.

As a result, “those nearing retirement have been particularly hurt by the downturn.”

“These investors tend to have more funds allocated to shares, so [they] have higher susceptibility to market crashes. Typically, they are still working and need that income to build retirement savings,” he explained.

COVID-19’s impact highlights the danger of sequencing risk, the CEO also flagged – where the timing of poor market returns can permanently damage retirement savings.

According to the CEO, “Prospective investors can ill afford to have the share component of their superannuation crushed by market volatility.”

He said some individuals “do not have enough time left in the workforce to rebuild their wealth”.

It’s why the current downturn has reinforced a need for retirement-savings products that have a low-cost protection mechanism, according to the CEO.

“As prospective retirees are realising, diversification and asset allocation are no panacea to protect wealth during crises,” he continued.

“Retirees need adequate protection on the share component of their portfolios.”

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About the author

Grace Ormsby

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.

Grace is a journalist on Momentum Media's nestegg. She enjoys being able to provide easy to digest information and practical tips for Australians with regard to their wealth, as well as having a platform on which to engage leading experts and commentators and leverage their insight.