Aussies misled on retirement needs, says Cooper
Chair of the 2010 Super System Review and Challenger's chair of retirement income, Jeremy Cooper, says a focus on lump sum super balances rather than income is “misleading” ordinary Australians about what is required for retirement.
Assumptions and assertions that $500,000 or even $1 million in super, in the current environment, will guarantee a comfortable retirement are suspect, Mr Cooper said in a column published by Fairfax Media,
“They are also unhelpful to the extent they influence saving behaviour and policy debate,” said Mr Cooper.
The price of an age pension in today’s interest rate environment is about $1 million.
“For that amount, a couple will get $1,297 a fortnight or $33,717 of income a year,” he said. “The full age pension (including supplements) would cost a 65-year-old couple a surprising $1,022,000 to buy today.”
Mr Cooper said it is important to remember that the age pension is a safety net for those without the means to support themselves with dignity in retirement.
“A comfortable retirement would cost more,” he said.
The government should consider periodically publishing the present-day value of the age-pension as a ‘value signal’ or risk-free retirement income benchmark, Mr Cooper suggested.
“The information could also serve as a tool to help assess proposals for changes to retirement taxes,” he said.
“The simple amount of capital a person has saved for retirement at a single point in time is often a poor guide, across an economic cycle, of the future standard of living they are going to be able to enjoy in retirement.”