Closing the retirement savings gap

It has now been two years since leading actuarial firm, Rice Walker provided the Investment and Financial Services Association (IFSA) with ground-breaking research on the extent of the retirement savings gap in Australia, and the picture appears to be little better in 2005.

IFSA’s annual conference held in Brisbane last month was told that if the the superannuation savings gap was closing at all, it was only closing in net terms.

Rice Walker’s follow-up research was expected to be released in full at the IFSA conference, but the industry body has decided that it will delay making the findings public until later this year.

Nonetheless, Rice Walker principal, Michael Rice left delegates in no doubt that the problem of the savings gap substantially remained.

Rice said that the gap was probably increasing in “gross terms” but when a number of measures, including factors such as the introduction of the superannuation co-contribution regime and the abolition of the superannuation surcharge were taken into account, the “net gap” might actually be decreasing.

According to Rice, one of the underlying problems for Australia in closing the savings gap is the nation’s improved levels of longevity, resulting in a growing number of Australians living longer than their retirement savings.

“And the people who out-live their life-expectancy will fall back on the age pension,” he said.

Rice said that the increased longevity of Australians meant that every year the savings gap was widening but that measures such as the co-contribution meant that the problem might not be as critical for the next generation.

The Rice Walker research released two years ago revealed a savings gap equivalent to $600 billion and it is understood that this number has not substantially altered over the intervening 24 months.