Funding retirement in Australia is centred on the compulsory superannuation system, introduced in 1992 by the Keating government, as well as the age pension and private savings.
From relatively small beginnings, superannuation has grown to become an asset pool in excess of $1.8 trillion held on behalf of Australians and is on its way to almost $8 trillion over the next 20 years, Deloitte notes in its Adequacy and the Australian Superannuation System: A Deloitte Point of View report.
“The Australian superannuation system is the fourth largest in the world and is a source of pride for government and those working in the financial services industry,” Deloitte stated. “It provides the country with an enormous pool of investible funds that offer the potential to generate wealth and prosperity for our ageing population.”
Specifically, the SMSF sector and its 1,006,975 members hold approximately $550 billion in assets.
These figures are significant. However, closer inspection reveals that Australia’s combined superannuation savings may not be sufficient for retirees, including SMSF trustees, in the long run.
Missing the mark
The 2014/2015 federal Budget was one of the strongest indicators yet that, moving forward, Australian retirees will need to rely more on their own retirement savings than ever before.
Speaking to SMSF Adviser, Challenger’s chair of retirement income, Jeremy Cooper, said the “ideological message” from the federal Budget is that Australians are going to have to fend for themselves a bit more.
“I think the message conveyed to Australians from the Budget and the surrounding rhetoric is the pension is not going to go away – it’s always going to be there – but it’s possibly going to be more of a safety net than it was before. In other words, less of a retirement strategy … and more of an absolute safety net,” Mr Cooper said.
“So I suppose to the extent which longevity risk was a problem before all that, it’s even more of an issue now.”