Independent modelling shows the federal government's increase in the superannuation guarantee to 12 per cent will deliver an extra $408 billion into super by 2030. But for many Australians it still won’t be enough.
One than three quarters of Australians won’t have enough superannuation to last them throughout their retirement, a new report from financial services group Deloitte warns.
The report also finds that the government’s increase in compulsory superannuation contributions to 12 per cent won’t benefit retirees until well after 2030.
Australia’s superannuation industry will grow in value to more than $6 trillion by 2030, Deloitte finds in its report, Dynamics of the Australian Superannuation System: the next years 2011-2030.
The estimated super balance for a single male to live a modest lifestyle in retirement is $280,000, according the Association of Superannuation Funds of Australia.
Deloitte Actuaries and Consultants partner Stephen Huppert said the average retirement balance for a single male in 2030 would be only $217,000, meaning he had a 78 per cent chance of living longer than his super could support.
“Clearly, Australians will be relying on the age pension for some time into the future,” he said.
“So, it is important that any proposals to deal with the ageing demographic consider the superannuation system and the social security system in unison.”
Deloitte partner Wayne Walker said the federal government’s increase in the superannuation guarantee to 12 per cent, from the current employer contribution of 9 per cent, would deliver an extra $408 billion into super by 2030.
“We will not see the full impact of superannuation guarantee going to 12 per cent for a generation and of itself it is not sufficient to help those people retiring in the next 20 years,” he said.
The Deloitte report also found one third of superannuation funds will reside in self-managed super funds (SMSFs) by 2030.
Elsewhere, both the unions and the industry have backed the government’s new “stronger super” superannuation reform legislation introduced into parliament last month.
ANF federal secretary Lee Thomas said the reforms, which included increasing the superannuation guarantee from 9 to 12 per cent, would encourage the nursing workforce to save for their retirement.
“The changes could result in nurses, midwives and AINs, paying significantly less in membership fees and give them more choice and overall flexibility when it comes to their super fund,” Thomas said in a statement.
The super increase will be phased in slowly, starting at increments of 0.25 per cent a year over seven years.
HESTA CEO, Anne-Marie Corboy said the super reforms would especially benefit women on low to middle incomes.
“It’s been widely acknowledged that 9 per cent super will not be enough to give most people the income they’ll need in retirement.”
Corboy said the introduction of a super contribution tax rebate of up to $500 annually for people earning up to $37,000 a year would particularly benefit women working part-time.
“Women on average have much less and sometimes up to half of the account balance of men. The average account balance for men in 2009-2010 was $71,645 and for women it was $40,475 and the pay-outs for retirees in the financial year 2009-2010 were $198,000 and $112,600 for women.
Particularly for women who work part time those balances are a lot lower.
Corboy said women’s retirement savings tend to grow at a slower rate due to equal pay issues and broken work patterns.
“There is also a provision that you have to earn $450 a month from one employer to be eligible to receive super. So for example, nurses who may be working for a number of different hospitals but don’t reach that threshold each month, will not be eligible for superannuation. We have been and will continue to lobby the government to have that threshold removed.”
She said Australia had an ageing population and a population that was not ready in financial terms for retirement.
“Building our retirement savings through initiatives such a tax rebate for super contributions is a really important public policy initiative.
“These are areas where people’s retirement savings can be built up without a lot of money having to come from the individual. We would like to see other public policy dollars targeted at low to middle income earners to support those who don’t have the capacity to put in the extra money.”
Removing the age limit for super guarantee contributions will also benefit individuals who are increasingly working beyond age 70 in an industry where skill shortages were prevalent, she said.
“The government has taken an important step towards helping improve the quality of retirement achievable for millions of Australians,”
However, she said about 75 per cent of Australians would still continue to access a part or full age pension.
Addressing the gender gap:
The federal government has also raised the superannuation gap for women as an area of priority.
The Minister for Employment Participation, Kate Ellis, told a superannuation forum that the majority of Australian women reaching retirement have no superannuation savings behind them.
Speaking in Sydney, Ellis said Australians needed to start talking about why so many women are facing retirement with so little money in the bank.
She said 60 per cent of women are retiring with no superannuation, and just over 70 per cent of all single pensioners are female.
“Talking about ageing is a bit awkward really ... talking about money is often doubly awkward.
“But this is something we need to talk about,” Ellis told the forum.
Ellis estimated that the government’s increase in the superannuation guarantee to 12 per cent by 2019/2020 would improve the savings of 4.1 million Australian women, with a 30-year-old woman on average wages seeing an extra $108,000 on retirement.
Ellis said the superannuation gap between the genders was due to a myriad of factors, including women more often shouldering unpaid caring work.
They also tended to take more career breaks to care for family, work part-time and experience lower incomes then men.
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