(Bloomberg) — About two-thirds of Australian baby boomers leaving the workforce don’t have enough retirement savings to retire comfortably, according to research from the industry’s peak body.
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Just over 30% of Australians can afford a comfortable lifestyle in retirement, according to the Association of Superannuation Funds of Australia. The average superannuation account balance for men aged 60-64 was A$205,385 ($137,690) and A$153,685 for women of the same age in June 2022, a far cry from the industry-accepted comfortable pension standard of A$690,000 for couples and A$595,000 for singles . .
With the country’s retirement pool approaching $4 trillion, an estimated 2.5 million Australians will retire over the next decade. The pension sector – known locally as superannuation – was made compulsory for all employees in 1992, with contributions equal to 3% of wages. The amount that employers contribute has grown to 11.5% and will increase to 12% next year.
But as the pension system matures and balances increase, the share of people who retire with enough money to finance a comfortable lifestyle will rise to 50% or more by 2050, ASFA chief executive Mary Delahunty said in an interview .
“The people who are retiring now have not received full benefits during their working lives,” Delahunty said. “So they will still need a good level of government help, or help from the rest of us, to retire with dignity.”
Concerns about retirement savings persist, even though Australia regularly ranks among the top pension systems in the world. About 40% of Australians say they will never have enough money to retire, despite the country having one of the most enviable pension systems in the world, according to a Natixis Investment Managers survey released last week.
“Many people are concerned about the comfort and options of retirees right now as the cost of living rises,” Delahunty said.
Balances fell slightly in the 12 months to June 2022 compared to the previous year due to poor investment returns, but have since averaged annual returns of more than 9%, Delahunty said.
Australia’s superannuation system is doing its part to alleviate pressure on public coffers. A 2023 government report shows that despite the aging population, expenditure on pensions is expected to fall from 2.3% to 2% of gross domestic product within forty years, because pensions are increasingly financed with pensions.
Yet the gender pay gap has fueled inequality in the pension pots of every age group, Delahunty said. According to ASFA, the average balance for men is A$182,667, compared to A$146,146 for women.
A shortage of financial advisors also poses a challenge. The government has announced a series of proposed reforms for the sector.
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