SG freeze to prolong reliance on Age Pension, says ASFA
While a recent report indicates that superannuation balances have risen substantially in recent years, the majority of Australians will still rely partially or substantially on the Age Pension by 2055, especially if SG remains at current levels.
A report released by the Association of Superannuation Funds of Australia indicates that superannuation balances are growing substantially, with balances in 2016–17 for individuals aged 60 to 64 at $336,360 for males on average with a median of $154,453, and $277,880 for females with a median of $122,848, excluding those with nil balance.
The ASFA report pointed out that these figures are up on the equivalent averages for 2011–12, which were in the order of $197,000 for men and only $105,000 for women.
They are also considerably higher than previous years, with an increase of 115 per cent for males and 238 per cent for females from figures in 2005–06. The increase in average balances for women is particularly significant
The report also showed that around 1.6 million out of 3.8 million Australians aged 65 and over have superannuation.
“This figure is up from around 1.3 million Australians just two years before. Superannuation now forms a significant and growing part of the retirement income of many Australians,” the report said.
Despite the increases in balances, the report stated that for those aged 65 and over, there are currently still around 2.6 million on a part or full age pension. Based on ATO data, in 2016–17 there were some 977,200 people aged 65 and over who lodged a tax return and did not get the age pension. Of that group, 677,300 had a superannuation account.
On the basis that the scheduled increases in the SG to an eventual rate of 12 per cent will occur, ASFA said it estimates that the proportion of retirees receiving a full or part age pension will fall from the current 70 per cent to 60 per cent by 2055, with 60 per cent of those receiving the age pension or the full age pension falling to 40 per cent over the same time period.
However, not going to 12 per cent would mean that the reduction in the proportion on the age pension would not be as great, it said, with ASFA projections suggesting that the proportion receiving a full or part age pension would only fall to around 65 per cent.
“The proportion on the full age pension would be higher than 40 per cent in 2055,” it said.
ASFA chief executive Martin Fahy said despite the promising growth of account balances, many Australians still face a retirement savings shortfall.
“The bipartisan, legislated policy of increasing the superannuation guarantee (SG) to 12 per cent is by far and away the most critical step to ensuring an adequate retirement for all Australians,” Mr Fahy said.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.