Super contributions down as workers stay longer
More people are working past retirement age and concessional contributions have dropped among older workers, placing unwanted pressure on the superannuation outcomes of many Australians.
However, while these shifts are not positive stronger market indicators, salary growth and longer working lives have led to higher superannuation balances at retirement and higher projected final salaries for workers, according to the AMP Retirement Adequacy Index.
The index, which measures retirement and superannuation income trends for 2012, found that overall contribution rates into superannuation fell by 0.2 per cent through 2012 to end the year at 12.1 per cent, the lowest level since the Index began in 2007.
However it was the changes in contribution caps which had a greater impact, with voluntary contribution rates, especially among older workers, falling markedly last year. Total voluntary contributions fell from 7.8 per cent to 6.7 per cent for those aged between 55-59 years, while for those aged 60-64 voluntary contributions feel from 14.2 per cent to 11.7 per cent.
Despite this, the projected super balance at retirement for an average worker increased by 7 per cent due to higher salaries and longer working lives, with the average worker able to expect to retire on about $52,000 per year, $3,000 higher than the level reported for 2011.
Part of this increase has come about due to more people working longer, with the number of people retiring after age 65 rising from 24 to 28 per cent over the year, but also making $5000 more in higher projected final salaries.
The report states that while the overall retirement adequacy of working Australians has increased slightly, the "key trends in this issue — super savings down for older workers, but projected pension payments up" — are the opposite of longer-term hopes for the superannuation system".
AMP Financial Services managing director Craig Meller said index suggested declining levels of engagement with superannuation "which was a worrying trend as higher numbers of people approach retirement".
"One way to encourage voluntary contributions and better engagement is to raise the concessional contributions caps. We welcome the progress made this week in Parliament on legislation increasing the caps for older workers and look forward to the increases becoming law in the coming weeks.
"It's important for individuals to think about what sort of life they want for themselves in retirement and to factor that into their planning. It's been a challenging few years but it is important to remember that super remains the most tax effective long terms savings strategy," Meller said.
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