5 March 2015
Increase in retiree numbers and average life expectancy highlights the importance of superannuation: ASFA
An increase in the number of people retiring and living longer in retirement than ever before shows the critical role the superannuation system will play over the coming decades, according to the Association of Superannuation Funds of Australia (ASFA), following the release of the 2015 Intergenerational Report earlier today.
ASFA CEO Ms Pauline Vamos says the Report highlights how superannuation provides benefits to individuals and the community, by decreasing reliance on the Age Pension and providing individuals with additional income in their post-work years.
“This Report confirms that the superannuation system is delivering in terms of decreasing reliance on the Age Pension and providing income to retirees to live a better lifestyle in their retirement years. ASFA estimates that, at present, around 32 per cent of retirees aged 65 have accumulated enough superannuation and private savings to be fully self-funded. As the system matures, these benefits will only broaden and increase, with the number of fully self-funded retirees aged 65 rising to 40 per cent by 2023. This means less government spending on the Age Pension as a result of superannuation.
Source: ASFA Research Centre.
“Government budgets will continue to be stretched by escalating health and aged care costs, and less working taxpayers to fund these expenses. As the system matures and individuals accumulate higher levels of superannuation, they are also more likely to be able to fully or partially self-fund these expenses, further alleviating demographic-related fiscal pressures.
“Adequacy will also be a key factor, which is why we will continue to advocate for the Superannuation Guarantee (SG) to be increased to 12 per cent as soon as possible.”
Ms Vamos says the Report also highlights the importance of policies that improve outcomes for people as they transition from full-time work.
“The increase in the number of people entering retirement and living longer than ever before also highlights the importance of developing income-stream products that cater to the varying needs of retirees. This includes products that deliver income and capital growth, protect against longevity risk and have enough flexibility to accommodate increased expenditure on aged care or health-related services, particularly in later years.
“The starting point is to get the regulatory and legislative settings right, to foster innovation and broaden the range of products available to the community. It is therefore encouraging that the government is reviewing the regulatory obstacles that hinder the development of new products as part of the Financial System Inquiry (FSI) process.”
Last year, ASFA released a framework for delivering retirement income stream products, which outlined six tiers under which they could be classified according to their various features.
“This framework provides a blueprint for how we can improve the post-retirement phase of superannuation, so people do not outlive their benefits, and have enough flexibility in their financial strategy to accommodate their different needs.
“We urge policymakers, all stakeholders and the community to come to a consensus on how the retirement income stream framework can be delivered so that it provides the best outcomes for the community.”
With average life expectancies in 2054/55 set to hit 95.1 years for men and 96.6 years for women, Ms Vamos says it’s critical people take control of their finances now, to ensure they have a plan to save enough money to last all their post-work years, and to accommodate age-related expenses.
“Instead of relying on the government to provide for your retirement, people should be taking control of their finances now and focus on building a pool of private savings to fund their post-work years.
“This is particularly important for women, who at present retire with around half as much superannuation as men. This is why we urge all women, in the lead up to International Women’s Day, to spend one hour getting their super sorted, making simple changes that will help boost their retirement savings.
Ms Vamos says the Report also highlights the need to review some of the tax settings of the superannuation system to ensure its equity and sustainability as the system continues to mature.
“There are a number of different levers that can be pulled to generate additional revenue or contain the costs of supporting the baby boomer generation through their retirement years. In this context, there are parts of the superannuation system and the broader retirement income system that will need to be reviewed to improve its equity and sustainability.
“As a starting point, it may be appropriate to question whether it’s fair for future generations of taxpayers to fund growing tax concessions on earnings for older Australians who have accumulated very high superannuation account balances.
“These conversations will no doubt be part of the tax issues paper process, and we look forward to working with policymakers, stakeholders and the broader community on the solutions required to meet the challenges ahead,” Ms Vamos concluded.
Click here to download a copy of ASFA’s policy framework for post-retirement.
For further information, please contact:
Lisa Chikarovski: Manager – Consumer Strategy, Media and Public Affairs, 0451 949 300.
ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. It is a not-for-profit, sector-neutral, and non-party political national organisation, which aims to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice.