Retirement fears drive super sprint

Older workers are essentially sprinting to the finish line, ramping up voluntary contributions to their super in a bid to maximise their nest eggs.

New research from Roy Morgan shows that in the 12 months to October 2018, a massive 65.9 per cent of workers aged 55 or older were salary sacrificing into super. This includes 35.2 per cent of workers aged 55 to 64 and 30.7 per cent of the 65-and-over age group. Only 24.4 per cent of those aged 45 to 54 were making contributions above the 9.5 per cent compulsory level.

This is a potential problem as it is generally recognised that without additional contributions, the current compulsory level on its own will not provide sufficient funds in retirement for most workers to be self-funding.

The research, based on interviews with more than 50,000 Australians, also showed that women were continuing to close the contribution gap on men.

In 2009, nearly one-quarter (24.5 per cent) of working men were contributing to their superannuation beyond the compulsory level, as were 21.1 per cent of women. The latest figures for 2018 show that men’s contributions have declined to only 18 per cent and, though women’s contributions have also declined (to 18.1 per cent), they are now marginally ahead of men.

Roy Morgan industry communications Director Norman Morris described the drop in voluntary contributions above 9.5 per cent as “a major retirement funding problem”.

In contrast to a recent Grattan Institute report, Money In Retirement: More Than Enough, which argued that “the vast majority of retirees today and in future are likely to be financially comfortable”, Mr Morris said: “The low level of above compulsory superannuation contributions presents a major retirement funding problem for workers and the government.”

He said competing financial burdens and the financial services royal commission, which is sitting again this week, were factors contributing to the decline.

“Other financial issues are obviously negatively impacting and are related to competing priorities such as housing affordability, leisure activities, rising household expenses, all in an environment of low wages growth and political uncertainty,” he said.

“It is also likely that the many negative issues coming out of the finance royal commission are contributing to the potential for lower levels of engagement in this market.”

YourLifeChoices asked members in its 2018 Retirement Matters Survey how much in savings they believed was required for a comfortable retirement. Fifty-seven per cent of the 5932 respondents said a couple needed $600,000-plus and 22 per cent said at least $500,000; while 69 per cent said a single person needed a minimum of $300,000.

As reported in the September issue of YourLifeChoices’ Retirement Affordability Index™, the Australian Institute of Superannuation Trustees (AIST) estimates that most people approaching retirement have about $100,000 in super. It estimates that in July, median super balances of Australians aged between 60 and 64 were as low as $37,000 for women and $114,000 for men.

Did you or are you salary sacrificing to bump up your super balance? If not, why not?

Related articles:
Super grows eight per cent richer
How super changes will affect you
The 10 best and worst super funds

Janelle Ward
Janelle Ward
Energetic and skilled editor and writer with expert knowledge of retirement, retirement income, superannuation and retirement planning.
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