For Australians with lower incomes, superannuation often feels like a puzzle. It promises financial security but can be inaccessible and overwhelming, especially for those already at a disadvantage. 

According to research by the Association of Superannuation Funds of Australia (ASFA), only 51% of Australians seek financial advice before retiring. This knowledge gap leaves many navigating their retirement savings without the tools to make informed decisions.

Expert advice is critical for maximising superannuation, yet it is those with smaller balances who are least likely to access it. This is a missed opportunity. Financial advice can help optimise investments, reduce unnecessary fees, and create tailored drawdown strategies, ensuring savings last throughout retirement. Despite its value, only 12% of Australians turn to super funds for advice, even though trust in these funds remains relatively high.

Career interruptions for caregiving or illness often leave women particularly vulnerable, with superannuation balances significantly lower than men’s. These interruptions, combined with lower wages and fewer opportunities for employer contributions, highlight a structural inequity in the system. Women who take on unpaid caregiving roles are often left with limited super savings, exacerbating financial insecurity in retirement.

Superannuation benefits skew heavily towards high-income earners. The wealthiest 20% of households control 70% of super assets, and voluntary contributions, used to minimise tax, are predominantly made by this group. For many low-income Australians, superannuation appears to be a tool for the wealthy rather than a viable path to financial security.

The high cost of independent financial advice, ranging from $4,000 to $12,000 for a personalised plan, is a significant barrier. While super funds are beginning to offer free financial advice, conflicts of interest remain. Funds may not recommend external products, limiting retirees’ options and potentially compromising the quality of advice.

Failing to seek financial advice can lead to poor investment choices, unnecessary fees, and poorly planned drawdown strategies. This is particularly harmful for households with limited super balances, increasing the likelihood of poverty in retirement. For those without a fully paid-off home, every dollar saved can be the difference between security and financial hardship.

To better serve low-balance households, the superannuation system must offer accessible, independent advice. This would empower Australians to make informed decisions and challenge the perception that superannuation is only for the wealthy. Until this becomes a reality, many Australians will remain hesitant to engage with a system that seems stacked against them.

For a more in-depth view of these challenges and the data underpinning them, refer to the original article on The Conversation.