Australian retirement statistics, released this week, highlight how people just aren’t saving enough money to support themselves through old age.
The ABS reported Monday that almost two-thirds of retirees aged 45 and up relied on some form of government welfare as their main source of income last financial year.
According to Deloitte partner Russell Mason, the picture is far more bleak if you look only at people aged 65 and up: the minimum age for the Australian government pension.
Citing figures from the Australian Treasury, Mason said 81% of over-65s received either part or all of the maximum pension entitlement upon leaving the workforce, and an additional 10% would come to rely on the pension at some point during retirement.
Actuaries expect the former figure to fall to 75% in 20 years, and to a target of 50% by 2053, as government superannuation reforms take effect.
“We’ll never get down to zero,” Mason said. “I think 50% is achievable but 40 years is a long time … [and] superannuation rules change with amazing regularity.”
When the Keating government introduced the Superannuation Guarantee in 1992, it required employers to put 3% of an employee’s income into his or her superannuation account. That contribution grew to 9.25% by July this year and is due to grow to 12% by 2019.
Still, Deloitte has warned that men need to set aside 5.4% of their incomes and women 7.5% – on top of the 12% Superannuation Guarantee – to account for today’s longer lifespans.
Tough times for retirees
Figures from the ABS and Deloitte agree that more people end up on the age pension than the number that retire on the pension in the first place.
According to the ABS, only 46% of people aged 45 and up initially left the workforce relying primarily on welfare payments, but 66% were relying on a government pension or allowance when the survey was conducted in 2012-13.
Mason explained that today’s retirees faced tough conditions, with interest rates at a record low and the GFC having wiped up to 12.5% off their savings.
Today’s retirees also had more debt than in previous generations, he said, so although many people had substantial amounts tucked away in superannuation accounts, most of that money would go towards paying off a mortgage when the account holders reached retirement age.
According to a News Ltd report last month, taxpayers spent $36 billion in 2012-13 on the age pension.
Pensioners currently get the equivalent of $19,076 a year for singles or a total of $28,761 a year for couples plus a supplement of up to $1,591 or $2,397 for eligible singles and couples respectively.
Mason said that would support “a modest lifestyle”, especially for pensioners who owned their homes outright or had family support.
There’s more on Deloitte’s forecasts here.
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