Retirement adequacy defies financial crisis

In what appears to be a contradictory result, the latest AMP Superannuation Adequacy Report, released today, suggests retirement adequacy has actually improved in Australia despite the global financial crisis.

The report identified an average fall in superannuation balances of 6.5 per cent per member equating to $2,782, but pointed to the fact that in circumstances where average total contribution rates held ground at 12.5 per cent, people were actually slightly better off.

It said that for pre-retirees aged 60 to 64, the average contribution rate actually increased to 22.8 per cent, up 0.6 percentage points over the previous six months.

The report found that at current contribution rates, the average superannuation benefit for those currently in the workforce would provide an income of $21,631 a year in today’s dollar terms and that when combining superannuation, other investments and the age pension, today’s workers would have an average projected retirement income of $42,465 which is 1.1 per cent up on the same period last year.

One of the least surprising elements of the report was that it found those aged 50 and over experienced the largest absolute impact of negative market downturns, with older members’ superannuation balances hardest hit because they had fewer years in the workforce to recover their losses.

Commenting on the report, AMP Financial Services managing director Craig Meller said that more older people would rely on the Government for the age pension to supplement retirement savings and superannuation, following the impact of the global financial crisis.

“Current superannuation savings show that more can be done to reduce the burden of the age pension on Government finances in the future,” he said.