Aussies to outlive super

DESPITE the projected growth in total superannuation assets to more than $6 trillion by 2030, most Australians will last longer than their super does.

Deloitte actuaries and consultants partner Stephen Huppert said 50% of the population was expected to live beyond the standard 85 years of age for a male and 88 years for a female. “We believe that a single male retiring with an account balance of $217,000 [in 2030] and taking an income stream of $22,000 per annum has a 78 per cent chance of outliving his retirement,” he said.

The $22,000 is based on figures from the Association of Superannuation Funds of Australia’s retirement standard for a modest lifestyle in retirement. The Deloitte report said to retire on a modest lifestyle a male would require a balance of $280,000 while a female would need a higher amount of $310,000 due to greater longevity.

The report revealed legislation that had been introduced to Parliament to increase compulsory super guarantee from 9% to 12% would not benefit retirees until after 2030. The raise will be done in increments over the next seven years if the legislation passes both houses. The age limit for making contributions, which currently stands at 75, would also be removed.

Huppert said volatility in investment markets also raised the risk that retirees would run out of money before they died. “The Australian superannuation system is still dominated by lump sums, but we are seeing an increasing portion of retirees opting for an income stream,” he said. “It is expected that this trend will continue presenting a challenge for funds to provide services and pension benefits for members as the approach and transition into retirement.”

“Clearly, Australians will be relying on the age pension for sometime into the future. So it is important that any proposals to deal with the ageing demographic consider the superannuation system and the social security system in unison.”

The federal government understood the challenges facing Australians approaching retirement, Deloitte actuaries and consultants partner Wayne Walker said. Walker said the government’s move to increase the superannuation guarantee to 12% and the qualifying age for the pension to 67 were intended to help Australians provide for their own retirement by saving more and working longer. “Our analysis suggests that addressing adequacy in retirement is still a work in progress.”

Deloitte head of superannuation Russell Mason said the company’s report (Dynamics of the Australian superannuation system: the next 20 years 2011-2030) projected that the number of corporate plans would fall, and in many cases be replaced with specific arrangements in master trusts and industry funds. “This transfer from one pocket to another manifests itself in a relatively high growth rate in the retail employer-sponsored and industry segments,” Mason said. “Public sector funds are expected to continue to grow at a reasonable rate over the next 20 years, but corporate funds will remain flat.”