In light of the growing fiscal impact of Australia’s ageing population and the results of an attitudinal survey on age care provision and financing, the Association of Superannuation Funds of Australia (ASFA) has today released a paper to start the discussion on the role that superannuation could play in ensuring adequate aged and health care provision in retirement.
The total cost of aged care is projected to reach almost $290 billion in 2055, driven by an ageing population and an increase in the prevalence of dementia. At the same time, large numbers of Australians over the age of 45 are experiencing difficulty in their dealings with the aged-care system, and there is considerable demand for more financial advice, educational tools and materials on aged care.
“Financial modelling shows that health care costs funded by the Commonwealth Government are likely to more than double per person over the next 40 years,” explained Pauline Vamos, CEO, ASFA.
“As fiscal pressures on governments increase, individuals will be under greater pressure to fund their own expenses and we will see a new generation of retirees having to make substantial contributions for health and aged-care expenses as they reach old age.”
“There is also a clear gap in the provision of financial advice in aged-care issues, and according to our attitudinal survey, Australians believe that their superannuation fund is well-placed to give such advice.”
“Australians believe that superannuation could play a role in meeting the future of aged-care funding and advice, and it is now a good time to consider what this role could be.”
ASFA’s discussion paper has raised a number of issues for policy maker and stakeholder consideration, including:
- whether the defined purpose of superannuation should explicitly include a role in meeting future aged and health care needs;
- the adequacy of a 12 per cent Superannuation Guarantee in light of growing health and aged care costs and the potential for higher contribution rates to meet these costs;
- the interaction of superannuation with government provision of health and aged care;
- key design features to meet future health and aged care needs;
- the extent to which adviser standards need to incorporate aged-care advice;
- the role superannuation can play in improving access to aged care.
“There are clearly many stakeholders involved in retirement incomes, aged care and health care – the retirement system is complex. We look forward to all stakeholders coming together to discuss these important issues,” concluded Ms Vamos.
“Now is the time to collaborate and plan to ensure that we are continuing to deliver the best possible retirement system in 2050 and beyond.”
Key findings from ASFA discussion paper: the future interaction of superannuation with aged care and health care
- There will be greater pressure for individuals to fund health and aged care: the fiscal pressure of Australia’s ageing population will grow and impact on Commonwealth and State Governments’ fiscal positions.
- The probability of requiring aged care is high: the likelihood that a female aged 65 will enter permanent residential aged care in her lifetime is 54 per cent, and for a male this risk is 37 per cent.
- There is a high degree of interaction with the aged care system: a survey of those over the age of 45 shows more than half (54 per cent) are dealing with the system, or have dealt with it in the past for themselves or a family member.
- At the same time there is a high degree of uncertainty around the aged care system: the majority of those interacting with the aged care system find it difficult to deal with—58 per cent find it “difficult” or “very difficult” to deal with the aged care system.
- There is a gap in advice on aged care and many consumers consider that superannuation funds could fill this gap: 46 per cent of people think their superannuation fund could play a role in helping organise and pay for aged care:
- there is considerable demand for financial advice and educational tools, and materials on aged care offered by superannuation funds, with three in five likely or very likely to take these up—around 60 per cent.
To download the discussion paper, click here.
To view Pauline Vamos' keynote speech on this topic at the ASFA 2015 Conference, click here.
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.