Yesterday’s seminal analysis by the Actuaries Institute, “For Richer, for Poorer” outlines the relative wealth of working Australians from young workers through to those approaching retirement.
The White Paper explores the importance of superannuation as part of the wealth profile of Australians at retirement and the different financial risks facing fund members. It was based on analysis undertaken for the Institute by Rice Warner.
A key finding of this report is that, on the whole, the superannuation system is achieving its primary objectives of accumulating assets to fund retirement incomes and of reducing the level of dependency on the Age Pension.
Younger Australians will benefit from high levels of employer superannuation over long periods, so they will retire with more superannuation than those close to retirement today. However, their overall wealth may not grow very much as they will have a lower home equity component in their wealth. The research suggests that a 30 year old couple with average wealth will have 12% more wealth (in real terms) at age 65, than the wealth built by a couple aged 60 today.
Single women will not close the retirement gap as men benefit more from employer contributions (which are linked to salaries). Consequently, many young females will not achieve a comfortable retirement even after a lifetime of employer support.
The combined impact of generous superannuation tax concessions, long periods of real investment returns and expensive housing shows that the top 5% of income earners near retirement have 50 times the wealth of the bottom 5%. For 30 year olds, the projected gap is only 10-fold, but the variance within each generation does show why many commentators suggest that tax concessions need to be reviewed.
Is there anything that can be done to improve the position? Here are three key measures proposed by Rice Warner.
Source: Rice Warner
