Retirement adequacy depends on Govt action

retirement/taxation/retirement-savings/superannuation-contributions/superannuation-guarantee/government/cooper-review/

11 February 2010
| By Caroline Munro |
image
image
expand image

Australians face a shortfall in retirement savings, and may have to accept lower living standards or bump up their savings though contributions.

According to ING’s superannuation strategy manager, Graeme Colley, 2010 will be an interesting year in light of the Henry Review on taxation and the Cooper Review.

“With the recent [Intergenerational] report on retirement, it was interesting to see the two major things that the government came out with were the costs of aged care and how we were going to fund retirement,” said Colley.

“Whether this fits with what the Henry Review comes out with will be interesting to see,” he said.

He added that superannuation savings into the future will probably come from voluntary savings rather than through subsides.

“We’ve seen the Government cut that back last year, saying that’s still enough to provide for a reasonable retirement income — but that amount is always debatable.”

Colley referred to research from the University of New South Wales, which stated that an adequate retirement income is 20 times pre-retirement income.

Illustrating the point, Colley said a person aged 40, who earns $60,000 per annum, has $250,000 in super and who wants to retire at 65, would need (at today’s value) $1.2 million at retirement if they were to go by the University’s figures.

“Indexed to 65 in dollar terms, people would need about $2 million for retirement.”

He said the current balance plus the superannuation guarantee and earnings at 65 will be about $807,000 at today’s value, a shortfall of at least $400,000.

“If the Government doesn’t take up increased funding through increased taxes, it is going to lead to reduced living standards in retirement — or people will need to bump up their superannuation contributions,” he said.

He added, however, that salary sacrifice is not as attractive now as it was 12 months ago when people could sacrifice higher amounts.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

1 month 3 weeks ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months ago

Entireti has unveiled the new name for the AMP financial advice businesses that it acquired last year....

4 weeks ago

A Sydney financial adviser has been permanently banned from providing any financial services, with the regulator deriding his “lack of integrity, trustworthiness and prof...

2 weeks 6 days ago

Minister for Financial Services, Stephen Jones, has provided further information about the second tranche of the Delivering Better Financial Outcomes (DBFO) reforms....

1 week 5 days ago

TOP PERFORMING FUNDS