(Bloomberg) — About two-thirds of Australian baby boomers leaving the workforce do not have enough superannuation to retire comfortably, according to research from the industry’s leading trade association.
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Just over 30% of Australians can afford to live comfortably in retirement, according to the Association of Superannuation Funds of Australia. The median superannuation balance for men aged 60-64 was A$205,385 ($137,690) in June 2022, and A$153,685 for women of the same age, a far cry from the industry-accepted comfortable retirement standard of A$690,000 for couples and A$595,000 for singles.
With the country’s pension pot approaching A$4 trillion, 2.5 million Australians are expected to retire in the next decade. The pension industry — known locally as superannuation — was made mandatory for all workers in 1992, with contributions equal to 3% of wages. The amount employers contribute has grown to 11.5% and is set to rise to 12% next year.
Still, the percentage of people who retire with enough money for a comfortable lifestyle will rise to 50% or more by 2050 as the pension system matures and retirement savings grow, Mary Delahunty, CEO of ASFA, said in an interview.
“The people who are retiring now haven’t had their full working lives,” Delahunty said. “So they’re still going to need a fair amount of government help, or help from the rest of us, to be able to retire with dignity.”
Retirement savings fears persist despite Australia regularly ranking among the world’s best pension systems. Some 40% of Australians say they will never have enough money to retire, despite the country having one of the world’s most enviable pension systems, according to a survey by Natixis Investment Managers released last week.
“Many people are concerned about the comfort and options available to retirees right now due to the rising cost of living,” Delahunty said.
Balances fell slightly in the 12 months to June 2022 compared to the previous year due to poor investment returns, but the average annual return since then has been more than 9%, Delahunty said.
Australia’s superannuation system is doing its part to ease the pressure on the public purse. A 2023 government report found that despite an ageing population, spending on superannuation is expected to fall from 2.3% to 2% of gross domestic product within 40 years, as superannuation increasingly funds pensions.
Yet a gender pay gap has fueled inequality in the pension pots of every age group, Delahunty said. The average balance for men is A$182,667, compared with A$146,146 for women, according to ASFA.
A shortage of financial advisors is also a challenge, with the government announcing a series of proposed reforms for the sector.
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