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Urgent action needed on Australia’s retirement savings gap

22 Nov 2010
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The Financial Services Council today released research that shows Australia’s retirement savings gap blew out to $897 billion in 2009, from $695 billion in 2008.

John Brogden, CEO of the Financial Services Council, said the findings highlighted the urgency of increasing the Superannuation Guarantee (SG) from 9 per cent to 12 per cent.

“The research shows the longer we delay the move to 12 per cent superannuation, the greater the cost for working Australians,” Mr Brogden said.

The research (undertaken by Rice Warner Actuaries for the Financial Services Council) provides a snapshot of Australia’s progress as a nation towards funding a comfortable retirement. The retirement savings gap is the difference between what is actually being saved through superannuation and what is needed to sustain a comfortable lifestyle after ceasing work.

“An adequate annual retirement income is defined as 62.5 per cent of a person’s last salary. Our research shows 9 per cent superannuation will fail to provide the population with their expectations of a comfortable retirement,” Mr Brogden said.

“The Superannuation Guarantee needs to be at least 12 per cent – this, combined with the Government’s plan to raise the concessional contribution caps for those nearing retirement and the SG age limit, would provide a 30-year-old on average weekly earnings with an additional $108,000 in their superannuation account on retirement.

“Increasing compulsory superannuation also has significant benefits for the Australian economy and the Budget. Higher savings would reduce Australia’s reliance on international investment, lower the current account deficit and ultimately provide a cheaper and more stable pool of funds for Australians to draw on.

“Higher contributions would also lower the tax burden on working Australians as the population ages by reducing the draw on the Age Pension.

“Parliament must support the rise to 12 per cent superannuation if Australians are to enjoy a comfortable retirement,” Mr Brogden concluded.

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