Less than a quarter of Australians are leaving the workforce with enough super to fund a comfortable lifestyle, a new report has found.
The Association of Superannuation Funds of Australia (ASFA) study found median super balances for retiring Australians aged 60 to 64 were only $154,453 for men and $122,848 for women.
Those are both well below the $545,000 figure that ASFA estimates is needed to fund a ‘comfortable’ lifestyle, in which retirees are able to afford holidays, a reasonable car, private health insurance and other goods and services someone with more modest savings wouldn’t.
While retirement savings have grown significantly in recent years (with average balances rising 11.4 per cent for men and 15.4 per cent for women in the two years to 2016-17), ASFA chief executive Dr Martin Fahy said it will be several years before the median balance reaches the standard for a comfortable lifestyle.
“Once the legislated increase of the Superannuation Guarantee to 12 per cent is in place, ASFA projects around half of Australians will be living comfortably in retirement by 2050, which is just over double the current proportion,” Dr Fahy said.
ASFA standard not universally appropriate
Speaking to The New Daily, Combined Pensioners and Superannuants Association chief executive Paul Versteege said average retirement balances are “quite low” given the system has been in place for more than 25 years, but cautioned the $545,000 figure given by ASFA doesn’t suit everyone.
“For some people, that’s too much, for others it will be far too small,” Mr Versteege said.
“We need to let government and Australian citizens define what it means to have enough, and not leave it to ASFA or the superannuation funds.”
For example, those retiring with the current median balance are unlikely to be unhappy through their retirement, Mr Versteege said, and focusing exclusively on retirement balances ignores the role that age pensions play in ensuring everyone has a dignified retirement.
Subsequently, Mr Versteege welcomed the prospect of a review into retirement incomes.
“Let’s have a review, and I’d like to see that happen with a bipartisan approach, and then let’s implement the reforms that come from that review,” he said.
“Debating now whether the super guarantee should be 12 per cent, or even 15 per cent, is kind of putting the cart before the horse. We need to think about what ‘enough’ for retirement will be, and maybe relook at the Ken Henry tax review from 2010 as a basis for that.”
Eva Scheerlinck, chief executive of the Australian Institute of Superannuation Trustees, agreed the amount of savings needed for a comfortable life will vary from person to person, but supported increasing guaranteed super contributions to 12 per cent.
“All benchmarks have their limitations due to the various assumptions they make about lifestyle and expenditure patterns,” she told The New Daily.
“For example, the current benchmark for a ‘comfortable’ retirement of around $43,000 a year for a single person might be generous by some people’s living standards, but inadequate for the increasing cohort of single people who retire without owning a home.
“For this latter category, increasing the compulsory super contribution rate to 12 per cent will be critical.”