ASFA welcomes the debate on the amount of income people should be aiming for in retirement and Morningstar’s research, released yesterday, which supports ASFA’s underlying methodology for calculating our Retirement Standard. However, we strongly question the claims in the research released by Morningstar cited in your article yesterday. We are particularly concerned about the challenge to the integrity of ASFA's Retirement Standard and the claims that people need to save more to fund their retirement.
The methodology underlying the ASFA retirement standard is quite different to a simple 'replacement rate' indexed by inflation used by Morningstar. Instead, it adopts the approach of identifying a basket of goods/services likely to be consumed in retirement, representing a typical (modest/comfortable) retiree’s expenditure pattern, which is then adjusted for product/service specific inflation over time. What the Morningstar research criticises is the “replacement rate”, indexed by a single inflation figure, which is common globally and is quite different to ASFA’s retirement standard.
Secondly, as you will see in new account balance data released today, the reality is that on present estimates, most Australians will still rely substantially on the Age Pension to fund their retirement. Therefore ASFA's consistent message to encourage people to save more so they can live the lifestyle they want in retirement is relevant and important. This message is even more important for women, who tend to retire with substantially less super than men.
For further information, please contact:
Lisa Chikarovski, Media Manager, 0451 949 300