Generation X (39 to 53 years) have the highest expectations on retirement incomes and are the only group who predominately say they will need more than what is deemed a comfortable standard by the industry.

Research by the Association of Superannuation Funds of Australia (ASFA) showed that all other age demographics predominately want to retire on the ASFA comfortable standard of $43,300 for singles and $61,000 for a couple.

The largest cohorts in all other age groups, (40 per cent or more) thought they would land within that comfortable standard. For Gen X, 47.7 per cent aspire to more than the comfortable standard, while 36.7 per cent want to land on it.

The less-aspirational World War II generation was more likely to say they wanted the age pension with a little cream on top, and relatively fewer of them (21.2 per cent) wanted to outdo the comfort standard.

Paul Versteege, policy co-ordinator of the Combined Pensioners and Superannuants Association, said many people were confused as to how much they would need in retirement. And while they may have heard of various standards, they did not understand what they were.

“There is a lot of media coverage about what is enough, but most people are not aiming for anything in particular – they just want to be OK,” he said.

Can we pay for it?

The affordability of the retirement system has been up for scrutiny, with the Grattan Institute recently claiming that a planned boost of the superannuation guarantee (SG) from 9.5 per cent to 12 per cent of wages would cost the taxpayer around $2.5 billion a year, with little recompense by way of reduced pensions until 2060.

However, research from Rice Warner shows that the percentage of eligible people actually taking the age pension has declined in the past two decades and will continue to do so.

The proportion of eligible people receiving the pension fell from 80 per cent in 1998 to under 70 per cent by 2018.

Rice Warner said the figure would fall to around 57 per cent by 2038.

And the relative cost of the pension is expected to fall from 2.6 per cent of GDP in 2018 to 2.5 per cent in 2038 and to around 2 per cent in the longer term, Rice Warner said.

Rice Warner says over time that 80 per cent of Australians will reach the ASFA comfort standard through various mixes of superannuation payments and the age pension, depending on income levels.

Adequacy of retirement income for singles by income decile

To do that through the current mix of pension payments and superannuation will remain affordable, Rice Warner said. However, if the ASFA comfort standard was to be provided simply through the age pension, the cost would be 6 per cent of GDP, meaning the current system is far more affordable.

Currently superannuation tax concessions cost the budget $37.3 billion and this is likely to rise as the SG moves upwards.

However, Rice Warner found that super concessions as a percentage of GDP would rise slightly from current levels of around 2.3 per cent to around 2.4 per cent by the middle of next decade (as the 12 per cent SG cuts in) then fall slowly over time.

Fiscal impacts of different SG levelsThat means that the whole retirement system would become more affordable even as the average level of retirement savings rises.

The initial increase in overall super costs in relation to GDP as the 12 per cent SG cuts in is acceptable, ASFA research chief Ross Clare said.

“We don’t say it should be cost-neutral. It’s about improving retirement outcomes,” he said.

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