Retirement planning disconnect

Industry superannuation fund REST has released a new report reinforcing current research which reveals a major gap between pre-retirees’ dreams and reality.

The research, conducted by Lonergan, through phone interviews with 1167 Australians, aged over 50 and working full or part-time, contained little that could be termed ‘news’. It does, however, underscore the sad facts of retirement funding. Namely, that the median value of older working Australian’s superannuation is $125,000 and with ASFA’s current estimates of what is required for a comfortable retirement for singles, $545,000 and couples, $640,000, there remains a significant gap which is unlikely to be filled by a burst of late-career saving.

Of those surveyed, three in five stated that a modest retirement income would not be sufficient to fund their retirement plans, and that holidays, private health insurance and new cars may be the first things to be sacrificed.

One third of respondents felt they would need to work longer, with a preferred retirement age of 65-67 being pushed back a couple of years to 69 in order to afford a more comfortable retirement lifestyle. Interestingly, 29 per cent did not wish to retire at all.


Opinion: Is it your fault?

Everyone wants a comfortable retirement, but it’s your fault if you didn’t save enough to get one. Or is it? It’s time to question this industry fallacy.

So here comes another report on the retirement funding shortfall. And before we all beat ourselves up about what we didn’t do, let’s allow the facts to get in the way of this (not so) good story.

REST super is an industry super fund. It stands to gain from encouraging more people to join the fund and to invest more money for REST to manage. It is not a charity trying to help those in need. The report it has commissioned only interviewed 1167 people –hardly a huge number when you are trying to gauge something as important as retirement funding for those Australians aged 50 and over which is about 8 million people.

The executive summary starts with the statement that advances in medicine and healthcare mean ‘Australians are living longer than ever, placing increasing pressure on our pension, aged care and health systems’. This is arguable. Spending on overly generous tax concessions on superannuation places pressure on our budget and is about to overtake the Age Pension as a percentage of GDP. The spending on items such as the aforementioned tax concessions, negative gearing, diesel fuel rebates for multinational mining companies and so on is entirely at the discretion of the government of the day. Most sober economists note our Age Pension spending is the third meanest in the OECD, and entirely sustainable, despite the ‘bulge’ in the population representing the boomer cohort.

In discussing ‘how much is enough’, the report goes on to state that ‘the reality is many people do not save adequately for retirement…’. This gobsmacking generalisation does not take into account three important facts of life:

  • Many people do not EARN enough to save extra for retirement
  • Those who earn more, save more, by virtue of the Super Guarantee Charge (SGC). So the rich get richer and the poor get poorer, by virtue of our current unfairly skewed superannuation system
  • Women, carers and the self-employed are particularly marginalised by inadequate earnings and opportunity to consistently save.


And whilst the report does pay lip service to the fact that compulsory super has not been around long enough to help older Australians, it notes that it is reasonable for 50 per cent of respondents to expect to rely on an Age Pension – although the official Treasury projection for 2055 is 67 per cent (Intergenerational Report #4).

What is not needed is another inaccurate industry report, spouting assumptions about what ordinary Australians should do. Such reports are usually designed to grab headlines and win the PR battle for the funds that pay for the research. It should be seen for what it is, a commercial message and it is fair to deconstruct it as such. What is badly needed is more comprehensive research which uncovers life-course disadvantage and the way in which someone’s gender, education, occupational status and ability to stay employed shapes their ultimate retirement income. People are not necessarily underfunded for retirement because they laughingly blew all their money on the pokies. Those who earn less have had less opportunity to save and this is the sad fact of retirement income in Australia today.

What do you think? Is it your fault if you don’t have enough saved for retirement? Is the Age Pension still a ‘reward for service’? Or is it just a safety net for fewer people over time? What do you think the government should do to boost the superannuation balances of the less well off?

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