Superannuation ‘fear factory’ scares retirees

The superannuation industry loves to scare Australians into believing they will retire poor and will have to work until they die. Doing so helps the industry push their agenda of lifting the compulsory superannuation guarantee (SG) so as to boost the amount of funds under management and fee revenue.

The latest example of this brainwashing comes from the “widely-respected” Association of Superannuation Funds of Australia (ASFA), published without question from The Australian’s personal finance writer, Anthony Keane:

Rising numbers of Australians face the brutal prospect of working until they die if they want a comfortable lifestyle beyond retirement age.

Low median superannuation balances, COVID early-release super withdrawals and record-low interest rates are leaving many savers without enough money to retire comfortably…

The latest data from the Australian Bureau of Statistics shows the median super balance of men aged 55 to 64 is $183,000 and for women it’s $118,600.

However, to retire comfortably an individual requires $545,000 and a couple $640,000, according to widely-respected calculations from the Association of Superannuation Funds of Australia…

Author, consultant and former banker Satyajit Das said comfortable retirements would become a privilege for only the wealthy and upper middle classes, and a majority of people would have to “work till they die”.

“They are not going to have enough money,” he said… “At some point the Bank of Mum and Dad will become the Bank of Sons, Daughters and Friends”.

It’s a horrible picture painted by Satyajit Das and ASFA – one of elderly Australians living in poverty and eating gruel. Thankfully it is also utter bullshit.

Independent modelling from the Grattan Institute – which doesn’t have a vested interest in lifting the SG – came to the polar opposite finding. It found “that the vast majority of retirees today and in future are likely to be financially comfortable” with retirees “less likely than working-age Australians to suffer financial stress”:

Financial comfort

Retirees are the most financially comfortable cohort in Australia.

It also found that “even after allowing for inflation, most workers today can expect a retirement income of at least 91 per cent of their pre-retirement income – well above the 70 per cent benchmark endorsed by the OECD, and more than enough to maintain pre-retirement living standards”. Moreover, “many low-income Australians will get a pay rise when they retire, through a combination of the Age Pension and their compulsory superannuation savings”.

Australian retirement incomes

The overwhelming majority of Australians retire comfortably.

The Grattan institute’s findings were supported by the Australian Treasury’s Retirement Income Review, which showed that retirees often pass on inheritances almost as large as their nest egg on the day they retired:

Most people die with the majority of wealth they had when they retired. If this does not change, as the superannuation system matures, superannuation balances will be larger when people die, as will inheritances. Superannuation is intended to fund living standards of retirees, not to accumulate wealth to pass to future generations…

For example, assuming no change in how retirees draw down their superannuation balances, superannuation death benefits are projected to increase from around $17 billion in 2019 to just under $130 billion in 2059 (Chart 3H-5)…

So here we have another prime example of the superannuation industry talking its own book, supported by their lackeys in the mainstream media who present their propaganda as fact.

Evidence is ignored. Dissenting views are ignored.

In any event, if ASFA is so concerned about retirees’ retiring poor, it should argue to lift the Aged Pension. This is Australia’s genuine retirement safety net.

Unlike superannuation, the Aged Pension does not discriminate by how long somebody spends in paid work or how much they earn. And because the Aged Pension is means tested, it is generally targeted towards those that need it most.

However, the Aged Pension also doesn’t allow the superannuation industry to skim fat management fees. Thus, you won’t hear the industry talking about it.

Always follow the money.

Unconventional Economist
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Comments

  1. It’s a horrible picture painted by Satyajit Das and ASFA – one of elderly Australians living in poverty and eating gruel. Thankfully it is also utter bullshit.

    It’s doubly bad. Not only does it scare people to put more into super while they are working, it discourages them from spending when they are retired.

  2. Forsaken by destiny, forsaken by my own mind
    I must remove my skin to see belief in your eyes

  3. Cynical snake

    “even after allowing for inflation, most workers today can expect a retirement income of at least 91 per cent of their pre-retirement income – well above the 70 per cent benchmark endorsed by the OECD, and more than enough to maintain pre-retirement living standards”. Moreover, “many low-income Australians will get a pay rise when they retire, through a combination of the Age Pension and their compulsory superannuation savings”.”
    I call BS. How does that happen?
    After 20 years in the workforce I have maybe 2 years salary in Super, I cant see more than 10 years worth being there at 65 after another 20 odd.
    So how do you get 90% of pre retirement income for 20+ years with 10 years income in super? Are the underlying assumptions there realistic?

    “Most people die with the majority of wealth they had when they retired.”
    Probably true, but a lot of people have very little to none, and another group have so much they barely make a dent in it with living expenses.

    • Moreover, “many low-income Australians will get a pay rise when they retire, through a combination of the Age Pension and their compulsory superannuation savings”.”
      I call BS. How does that happen?

      The Bottom 10% or so of workers earn less than the full aged pension.

      • It’s also the fact that ON AVERAGE the calls on pre-retirement incomes are so much greater – housing, income tax, the costs of raising kids. ON AVERAGE people’s costs reduce so much after retirement, and can be reduced further by downsizing housing etc., that people ON AVERAGE have plenty for their needs. Doesn’t work for everyone, but on average it’s right.

      • Cynical snake

        Oops, I should have been more careful with my cut/paste, as I was talking about 90% of income as retirement.
        Mind you having workers earning less than the aged pension is a disgrace in my opinion.

        I also agree you require less income in retirement but that is not the claim being made.

        On AVERAGE, most families can afford housing currently as well. Not sure that’s a great benchmark…

        • bourklMEMBER

          Totally agree. Not everyone reduces their costs, not everyone has a reliable partner, not everyone has a stable job, etc., etc.

  4. LSWCHPMEMBER

    I’ve been a model of financial rectitude all my life, and stashed a sh1tload of extra cash into super to prepare for life after work. Two divorces sure didn’t help, along with being financially raped by the family court, but I’m going to be comfortable. No way am I going to have 91% of my pre-retirement income though. Overall I’m going to have about 35% of my current income. But with the house paid off and no kids to support (if Allah is merciful) it should be OK. I hope.

    • Cynical snake

      No one is having 91% of their pre retirement income, except those on welfare.

      • bourklMEMBER

        it’s actually very doable for a lot of people who only ever had 30-40k p.a. to spend while working after taxes, mortgage, etc.

        • Personal Risk ToleranceMEMBER

          Especially if retirement coincides with paying off the house.

          • Cynical snake

            None of that has anything to do with getting 90% of your INCOME pre retirement.
            Disposable is not mentioned there anywhere.

          • MathiasMEMBER

            Everyone will just be sitting on a Pension and paying off the House.

            The greatest tragedy of Australia isnt that we’ve financially buggered ourselves,
            the greatest tragedy is we absolutely wrecked our Labor Force.

            With such a lack of trust, people are just going to pull out of society and hybernate while the other half of Australia pretends to be rich to save us all ( which they wont because they’ll eventually realise they are powerless ).

            There’s a war in Australia between the Have’s and the Have Nots. On one hand, we want to protect the system as it stands, on the other, we’ve oestricised so many people that the System no longer works anymore.

            The Boomers only understand Power. You cant negotiate with them. Its gonna be a nasty lesson. People will probably die in this lesson.

            There’s only one way this can end and thats groups withdrawing into Tribalism as everyone covers each others a$$… which will only exacerbate Australias problems and make them even worse. Australia will break into groups and become totally unmanageable. The economys just going to tank.

            With Property Law being the Weapon, the way I see it, is in the end… it’ll be a war of people ‘Living Life’ vs Colonialism. Government will be forced to decide if it wants to kill its own people.

            Property Law is really the heart of Colonialism. Do we kill Australians or do we enforce Property Law?

  5. MathiasMEMBER

    Whats going to stop Assets from collapsing when the Boomers retire?.

    Yeah. Pensions a far better system.

    The only thing consistent in Australia is Australias Corruption.

  6. MathiasMEMBER

    I think the Liberals may feel they’ve isolated Australia with Power.

    Its beginning to look to me, like they are isolating themselves.

    Powers rising… and its not going where they think its going… its starting to turn ‘Against them’.

    Slowly but surely, Liberals are isolating themselves against virtually everyone.

    Liberals are a walking chequebook. When the money runs out, they’ve got nothing left.

  7. This article doesnt prove what the author self satisfyingly thinks it has. The current generation of retirees might be relatively comfortable, well off even. But future retirees are screwed, with very low bank rates necessitating exposure to more risky investments, and subject to considerable risk of a major drawdown near to retirement. Throw in the fact people are living longer, the only option is to work for longer.
    It boggles the mind that whoever wrote it actually manages OPM.
    As for the idea of increasing the aged pension as if it is some new idea, that is the whole point of having to super, so people prefund their retirements. Who or what is going to fund an across the board increase in the pension rate? The magic money tree?