Fairfax’s Peter Martin has written a ripper article today urging the Government to ignore the super industry’s estimates of how much retirees need for a “comfortable retirement”, noting that they tend to be ridiculously generous:
The latest scary figure, produced by the Association of Superannuation Funds [ASFA], is $58,784 per year. That’s how much it says a 65-year-old couple needs to live on in order to enjoy a “comfortable” retirement.
It’s absurdly high. The fine print shows such a couple would spend $40 a week on alcohol, $80 a week on dining out, almost $200 a week on food and groceries, $136 a month on the phone and internet, $4000 a year on holidays within Australia, and $14,000 every five years on a holiday abroad.
Plus this: the best part of $250 a month on new clothes and shoes, $80 a month on hairdressing, $54 a month on pest control and/or an alarm service, and $350 a month on private health insurance.
At the risk of stating the obvious, after tax and rent or mortgage payments most working Australians couldn’t afford such comfort.
…the super industry really doesn’t care about the living standards of Australians who are working or about the extra tax they have to pay because super funds aren’t. Its chief concern is the $2 trillion in funds it has amassed to date, and the tens of billions of dollars of it that stick to its fingers each year in management fees.
Martin is spot on. The super industry seems to believe that retirees – the overwhelming majority of whom own their homes and are not burdened with mortgage payments or raising children – should enjoy a better standard of living in retirement than those who are working and paying tax.
The Grattan Institute’s recent report, entitled Super tax targeting, clearly debunked ASFA’s “comfortable retirement” benchmark, noting that it is “more affluent than most singles enjoy when either working or retired”:
And is “more affluent than the lifestyle of about half of Australian couples”:
According to Grattan:
ASFA’s definition of a ‘comfortable’ retirement is based on a bottom-up calculation of spending that most Australians could never afford. It would fund one Australian holiday a year, and an international holiday every five years. It implies (post-tax) expenditure in retirement of $58,444 for a couple. Although this may sound low relative to average full-time pre-tax earnings, retirees tend to have lower expenditure as they are no longer saving, and typically are no longer paying off a mortgage…
In short, the Government would do well to ignore the industry’s special pleading about what constitutes a “comfortable lifestyle” in retirement. The superannuation industry cares more for maximising the amount of funds saved via superannuation, thus allowing it to ‘clip-the-ticket’ and earn out-sized fees, than building a genuinely sustainable and fair retirement system.
