Australians favour families’ retirement over inheritance

Amid aged care funding discussions, new research reveals 73 per cent of Australians are willing to forego an inheritance for their parents or older family members to enjoy a comfortable retirement.

Per CompliSpace’s 'Towards the Tipping Point in Aged Care Funding' report, the majority of Australians wanted their loved ones to access appropriate aged care and would want them to use the money saved away towards this. 

However, more than half admitted they were expecting an inheritance from their parents (74 per cent) or grandparents (19 per cent).

Some 55 per cent of respondents said older people themselves should be responsible for funding aged care followed by taxpayers (24 per cent) and families (22 per cent).

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Rather than signalling a shift in what older Australians “deserved” in retirement, the report suggested inflation and rising cost of living contributed to this change in sentiment. It highlighted how, in the December quarter 2022, the ASFA Retirement Standard to fund a comfortable lifestyle for a couple aged 65 to 84 rose 7.5 per cent in the past 12 months, now standing at $69,691. 

David Griffiths, CompliSpace’s chief executive, highlighted how the Morrison government’s 2020 Retirement Income Review Report found most retirees still died with most of their savings intact — largely because they were worried about funding their retirement. 

“Our national survey finds that almost three-quarters of Australians are willing to forego an inheritance so that their parents or older family members can enjoy a safe and comfortable retirement,” Griffiths said. 

“The question may not be whether older Australians are willing to pay for the care they need; the question may be whether their children and grandchildren want them to do so.”

Despite professing support for their older family members to spend everything on their own aged care, the report found that some 47 per cent of respondents would not be willing to do the same themselves. 

Over a third (36 per cent) said they intended to keep money aside for their partner, while 28 per cent said they would save for their children.

“Inheritances are getting bigger. Older Australians draw down the minimum on their superannuation and, most commonly, devote their wealth not to their own care but via inheritance to their children or other family members. Those who receive these inheritances are often people in their mid-50s who are financially secure and own their property outright,” the report noted. 

Understanding attitudes to inheritance

The report identified three major factors leading to larger inheritances in Australia. The first was older Australians “squirreling away” funds in anticipation of aged care and health needs or other unexpected costs. The Productivity Commission also found that Australians would accept a lower level of wellbeing or accommodation in retirement to maintain this wealth.

Secondly, the report identified the typical retiree’s refusal to sell the family home, resulting in no asset drawdown. A 2020 federal government report found that family homes in Australia were underutilised sources of wealth that could support and enable better living standards in retirement. 

Finally, the third factor was older Australians not viewing superannuation as a complementary asset used to boost their retirement outcomes. Large super tax concessions were inflating inheritance sizes from retirees not drawing down on their capital, the report said. 

Cash remained the most common form of inheritance (41 per cent) followed by property (28 per cent) and personal possessions (11 per cent). 

There was also wide variation in the value of inheritances received — around a third of Australians (31 per cent) received between $5,000 and $50,000. Thirty per cent received between $50,000 and $250,000.