Australia’s superannuation industry loves to scare the public into believing they will retire poor and will have to work until they die. Running this line helps the industry gain policy favour, such as lifting the compulsory superannuation guarantee, which boosts the amount of funds under management and fee revenue.
Super Consumers Australia (SCA), which is attached to consumer organisation Choice, has researched what retirees actually need in retirement, and believes the superannuation industry’s estimate of a ‘comfortable retirement’ is far too inflated:
SCA director Xavier O’Halloran told Geoff Hutchison on ABC Radio Perth they found many people believed they needed $1 million in savings to have a truly comfortable retirement.
“When we reviewed a lot of the commentary on how much you need to save for retirement, we see this figure coming up a lot. It’s often from groups or individuals that might have a self-interest in you having more and more savings”…
“They are all, of course, clipping your ticket in fees for managing that money…
“As our research found, that was appropriate really only for very high expenditure households”…
What SCA’s research found was that for a couple to have an income of $55,000 a year (which their research showed was an average level), they would need to have savings of $360,000.
A single person would need $259,000 to maintain an average income of $37,000.
Mr O’Halloran said only a couple wishing to maintain high living costs would need to reach $1 million by age 67.
SCA’s figures on a ‘comfortable retirement’ look right. According to the ABS, the median Australian employee earned $1,200 a week ($62,400 a year) as at August 2021:
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These are gross earnings, which means the typical Australian employee also needs to deduct tax of around $11,000 (including the Medicare Levy).
Unlike most retirees whom own their home outright, the median working Australians also must pay rent or a mortgage. Many also support children.
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In short, the superannuation industry’s ‘comfortable retirement’ estimate is way more luxurious than most Australians enjoy over their working lives. It is a scare campaign aimed at encouraging policy makers and members to funnel more money into the superannuation system, thereby lining the industry’s pockets.
As long as there is easy money to be made, the superannuation industry will continue to talk its book about a ‘comfortable retirement’.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
