If all super fund members (ignoring pensioners) consolidated their multiple accounts, Rice Warner calculates that the average account balance of $50,300 as at June 2015 would rise to approximately $90,000 – an increase of 79%.
Out of a total population of 23.8 million, 17.7 million Australians hold at least one account within the Australian super system. Of these, 11.7 million are currently employed in some capacity, while 2.2 million are retired. The 17.7 million fund members hold 29.9 million accounts, largely reflecting a widespread tendency to join new default funds upon changing employment yet holding on to existing fund memberships. Some people will also hold multiple accounts for legitimate reasons, for example to maintain insurance cover that they held in a previous fund.
It is difficult to assess the adequacy (or rather the inadequacy) of Australia’s retirement savings by concentrating solely on average member ACCOUNT balances, not the average MEMBER balances.
Yet even by focusing on member super savings across multiple accounts, average super savings at common retirement ages will still not provide a so-called “comfortable” standard of living in retirement – far from it.
In the 60-64 age group, Rice Warner calculates that the average member balance was $212,000 in June 2015 against an average account balance of $165,000.
However the December quarter ASFA Retirement Standard report calculates that a single 65-year-old, home-owning retiree would need savings of $545,000 to provide a “comfortable” standard of living – taking into account the Age Pension. This is a shortfall of $333,000, even based on the higher average member balance.
Significantly, super funds with a more accurate assessment of their members’ total super savings in their multiple accounts are better placed to understand and educate their members as well as to design more appropriate products.
And individual members who focus on their full super savings may feel more of an incentive to save more for retirement and to consolidate their multiple accounts.
