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Having too little saved for retirement is the top financial worry globally. Working part time is the next.

The changing face of work and how it will affect us all

Over the last decades, the world of work has changed dramatically. While the traditional career model of a job for life is fading, self-employment and ‘gig’ working is becoming more commonplace.

The hard reality is while the emerging gig economy promises flexibility, our banking and superannuation systems have not kept up with the changes and now only adds to the new stressors our community of casual workers is facing.

Read in this article

A 3-year study by the University of Oxford of almost 17,000 people aged 20 - 70 across 15 countries on five continents asked participants about their job situations and three core issues;

  • Anxieties related to new technology,
  • Their ability to adapt to change, and
  • Knowledge of financial resources and products available to them

Five key findings of the report

  • Women and routine manual workers are more vulnerable to the changing world of work.
  • Having a comfortable retirement emerges as the top global financial worry.
  • Job instability is as likely to be voluntary as involuntary.
  • Younger millennials seem financially conservative – but aren’t buying financial protection.
  • Attitudes towards technology’s effects on national labour markets don’t seem to differ by age.

The two surprising outcomes

  • Working people around the world are worried that they will be poorer than expected when they retire, and
  • The young are as anxious about their financial futures as their parents, but women are the most vulnerable as they are least likely to have pensions and insurance policies to protect them.

A Job for life is no more

The traditional model of a 'job for life with one employer' is no longer available for the majority of workers.

The new normal

While new technology is creating more opportunities for self-employment and ‘gig’ work, while people have greater freedom to change jobs and move from location to location it - comes with a price; your ability to afford to retire and the need to become more proactive about learning how to protect yourself and your family today.

The downside

While workers’ flexibility increases, they are also more prone to gaps when it comes to job and income security and some even find the employers push them towards being contractors.

  • Contractors don’t usually pay into their super funds and face often insurmountable obstacles applying for a traditional home loan, as the traditional bank looks for employee structures with continuity of employment.

Where to live your happily ever after?

Along with the Millennial idea of ‘simply rent what you need only when you need’, many of the problems ignored by this mindset are waiting for us in our old age - when we have fewer employment options and financial flexibilities.

  • For those non-home owners, being forced to rent somewhere for life will have a profound impact upon their need for more money in their super (and greater liquidity) and the need to increase the personal skills for managing their super investment decisions, especially as the statistics suggest a 25-year retirement is the new minimum.

It's important for people today to start taking more interest in their own financial lives sooner rather than waiting for a future date when they might be forced to do so during a time of unexpected stress.

Key findings

Across countries and even age groups, almost half of the respondents said their top personal-finance concern was adequate retirement savings. This was far ahead of paying monthly bills, which was cited as the top concern by 27%.

  • Having too little saved for a comfortable retirement is the top financial worry.
  • Women are more vulnerable to changes affecting the working environment
  • Women were less positive about technological change and more worried about losing their jobs because of it.
  • Women were also less knowledgeable about insurance products that provide income protection and less likely to have any, despite needing the protection more than men.
  • Women keep society ticking over then many retire into poverty because of the structured discrimination they face along the way

Pro Insight: Australian women in paid work are much more likely than men to be working part-time – almost half (45%) of women in the workforce are in part-time roles, compared with just 16% of employed men, and for mothers with children under five years of age, that rate rises to 61%, compared to just 8.4% of fathers with young children.

Millennials show strong signs of financial conservatism

  • Interestingly, the millennials were as likely as their older counterparts to practice saving part of their income in 2018, with 63% saying they were able to do so.
  • About a third of them (32%) reported that retirement is their top worry – and this concern was a very close second to the much shorter-term problem of paying their monthly bills (34%).

Job instability is likely to be both voluntary and involuntary

A fifth of the respondents believe they are likely to lose their job in the next year. Interestingly, however, an even greater proportion (27%) said they had plans to leave their job voluntarily within the same period of time. Of these, most appeared to be preparing to become freelancers.

What’s on the horizon post Covid19 in Australia?

The cost of managing and responding to the current pandemic will be wide-ranging.

  • Superannuation will lose the sacred cow status and will probably face new taxes.
  • The argument about whether the family home should remain free of annual land tax will be reopened, again as the government looks for new taxes to repay the $200 billion COVID19 debt (effectively priced at $7,600 per person)
  • Many Super funds have faced liquidity issues as COVID19 early release of super funds has created a liquidity drain and will face being consolidated into larger super funds in the next few years reducing available choice and compounding risks for consumers.
  • People in a non-essential type of employment may face additional lending restrictions from banks, as they move to 'rate for risk'.
  • The rising complexity of Australian financial life and further tax, super and pensions changes will cost consumers more as additional compliance costs push financial advice out of the reach of ordinary Australians.
  • As all new Income Protection policies are now capped to protect 5 years of cover only, those Agreed Value Income Protection policies already in force Special Alert: End of Agreed Value Income Protection for longer periods are now ‘worth their weight in gold’.
  • Today, being only able to protect an income for 5 years of working life (rather than till age 65 previously pre-March 2020) will have flow-on effects for the level of risks and size of mortgages many new borrowers will consider acceptable.
  • Self Manager Super Funds (SMSF’s) will face additional compliance and liquidity rules and therefore administration costs and liquidity insurance costs.
  • Investment Fund Managers will look for investments with more prominent risk protection in place, more conservative ROI (return on investments) and lower levels of capital debt in place.
  • The marked difference in a family's success will not be in the difference between the haves and the have nots, but the ‘information haves’ and the ‘information have nots’.

If there is ever a moment to pause and consider whether you need to be taking more interest in your money matters - this is it.

With all the changes just over the horizon (and heading our way), those with a professional relationship with a financial adviser will fare better; those taking a DIY approach to their money matters will struggle.

Where to from here?

What can you take control of today?

You can learn more about that here and when you’re ready we’d love to help you out.

author pic drew browneDrew Browne is a specialty Financial Risk Advisor working with Small Business Owners & their Families, Dual Income Professional Couples, and diverse families. He's an award-winning writer, speaker, financial adviser and business strategy mentor. His business Sapience Financial Group is committed to using business solutions for good in the community. In 2015 he was certified as a B Corp., and in 2017 was recognised in the inaugural Australian National Businesses of Tomorrow Awards. Today he advises Small Business Owners and their families, on how to protect themselves, from their businesses.  He writes for successful Small Business Owners and Industry publications. You can read his Modern Small Business Leadership Blog here. You can connect with him on LinkedIn Any information provided is general advice only and we have not considered your personal circumstances. Before making any decision on the basis of this advice you should consider if the advice is appropriate for you based on your particular circumstance.

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