Australians expect to receive a large inheritance from their ageing parents, which has dangerously left them exposed to a potential retirement savings shortfall, according to the latest HSBC Future of Retirement Report.
The report, titled ‘Life after Work’, found Australian retirees want to pass on an average inheritance of $US501,919 to their heirs, which is four times higher than the global average of $US148,205.
Almost 70 per cent of Australian retirees surveyed plan to leave an inheritance larger than retirees in other wealth western markets including the United States, United Kingdom and Canada.
However, this intention has made Australian families and other benefactors lazy when it comes to their own retirement planning, exposing them to a potentially massive gap in retirement income.
According to the report, half of working Australians believe a future inheritance will partially finance their own retirement while 14 per cent said they will largely rely on this money.
HSBC Australia’s head of retail banking and wealth management Graham Heunis warned of the risks of over-reliance on inheritance to fund retirement
“We know from previous research that Australians are complacent when it comes to retirement planning with Australians anticipating a 10-year shortfall in their retirement savings and nearly 60 per cent acknowledging they are inadequately preparing or not prepared for retirement,” he said.
“This complacency may partly stem from Australians banking on their inheritance to fund their retirement but this perception overlooks the fact that inheritance is often split between family members or may be eroded by children needing to pay their parents’ debts such as mortgages, medical or aged care needs.”
Unlike markets like the US and UK, where inheritance and estate tax can erode upwards of 40 per cent of an inheritance, there is no inheritance tax in Australia. Therefore, Australian retirees pledge an exponentially higher amount than the rest of the world.
Heunis said working-age Australians should view and treat a potential inheritance as a “bonus” rather than forming the foundation of a retirement plan.
The HSBC report captured results from 16,000 people in 15 countries including 1,000 Australians.
