More than half of Australians who retire today will have enough money to be self-funded rather than reliant on the Age Pension, according to new research from Challenger.
As at December 2018, around 55 per cent of 66-year-olds could not access the pension because their income and assets were too high, with 20 per cent able to draw a part-Age Pension and just 25 per cent receiving a full Age Pension.
And, according to YourLifeChoices research, the number of retirees able to qualify for the Age Pension will decrease even further. In the 2019 Ensuring financial security in retirement survey, 65 per cent of 60 to 64-year-olds (42 per cent of whom are already retired) are fully self-funded.
The research strongly indicates that Australia’s superannuation system is working, says Challenger’s chair of retirement income, Jeremy Cooper.
“Contrary to many opinions, super is reducing reliance on the Age Pension for the large majority of people entering retirement,” he stated in the Challenger report.
“The evidence for this is that the average newly retired Australian is not accessing the Age Pension at all.”
Compulsory superannuation was introduced in 1992. With 27 years of contributions under their belts, the average consolidated balance for Australian singles aged between 60 and 64 exceeded $300,000 in 2016-17 based on Australian Taxation Office aggregates for super balances. The super balance of a typical couple starting retirement today is around $400,000 and, depending on inflation, is estimated to be $600,000 in five years’ time.
And, according to Department of Social Services data, at the end of last year, 45 per cent of 66-year-olds were accessing the pension but only 25 per cent were receiving a full pension.
“With the typical super balance at retirement for a household being over $400,000, and most owning their own home, a sizeable majority of new retirees won’t be entitled to the full age pension at the start of retirement,” the report says.
“As super balances continue to grow, most retirees can expect to spend longer in retirement before they receive any Age Pension.”
Are you surprised at these numbers? Have you noticed a shift from pension-reliant retirees to more self-funded retirees?
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