A new report compiled by Rice Warner on behalf of the Actuaries Institute, has revealed that of those Australians now aged 30, over half will rely on the Age Pension as a means of retirement income. The white paper on retirement incomes, For Richer, For Poorer, highlights the financial issues facing future retirees.
The paper found that the changes, scheduled to commence on 1 July 2017, to asset thresholds and taper rates may result in median wealth couples losing the part Age Pension, which would affect their hopes of a comfortable standard of living. By comparison, the report found that even though those in the top income bracket could easily afford a comfortable lifestyle, they still qualify for a part Age Pension.
But the news is worse for those who are least wealthy, as their reliance on the Age Pension as a retirement income will continue. For those in the bottom five per cent income bracket, the Age Pension provided 93 per cent of their income in retirement and 73 per cent for those in the bottom 25 per cent income bracket.
“Importantly, the white paper shows that the least wealthy sections of the community, both now and in the future, will continue to be entirely dependent on the Age Pension to maintain even a modest lifestyle”, said Actuaries Institute chief executive David Bell.
One particularly sobering statistic was uncovered; those in the top five per cent income bracket had 50 times as much wealth as those in the bottom five per cent income bracket. This differential would drop to 10-fold for those retiring in 30 years time, suggesting that the superannuation guarantee is working for those who have had long enough to reap the benefit.
The report supports an already compelling case for a complete and forensic review of retirement incomes, including the inclusion of the family home in the asset test. Currently, an age pensioner could live in a property worth $3 million and have modest savings and still receive an Age Pension. Surely this can’t be right?
You can download and read the full white paper at www.actuaries.asn.au.