With over $2.8 trillion in the system*, it’s no wonder superannuation is always making headlines. According to the Treasury, it’s now the second largest part of Australia’s financial system.
The compulsory super system was launched in 1992 with the goal of helping people save for their retirement.
In the lead up to its launch, Prime Minister Paul Keating said that, compared to life on the age pension, superannuation could be “the difference between a full, active life and a life governed by budgetary exigencies and the vagaries of politics. The difference between being able to enjoy the free time at the end of one’s working life and wanting the means to enjoy it.”
This as the purpose of super was enshrined in law by the government in 2016, with new legislation stating the objective for superannuation is “to provide income in retirement to substitute or supplement the age pension”.
Almost 30 years on from launch, new research has found that the system is, for the most part, delivering on this goal.
According to research from Challenger, there is now more than $800 billion in the super accounts of members aged over 65. This figure represents over 28 percent of total assets in the super system.
The average balance per member in retirement is $305,000 for those in not-for-profit funds, like Qantas Super, compared to an average balance of $255,000 for members in retail super funds.
The average balance for Qantas Super members aged 65 and above is $390,000.
Given that the age pension is means tested, Challenger found that just 45 percent of 66-year olds were accessing at least part of the age pension, while only 25 percent were drawing a full age pension.
Overall, only 42 percent of age eligible retirees were on the full age pension – this includes retirees in their 90s, who have likely never had super.
| Full age pension | Part age pension | No age pension | |
| All 65+ | 42% | 28% | 30% |
| Age 66 | 25% | 20% | 56% |
| Age 80 | 55% | 27% | 18% |
“Super is working on a mass scale, even though it does leave a minority of people behind. Contrary to many opinions, super is reducing reliance on the age pension for the large majority of people entering retirement,” the report stated.
“The evidence for this is that the average newly retired Australian is not accessing the age pension at all.”
The numbers show that Australians are on their way to reaching retirement with the savings required to live what ASFA considers a comfortable lifestyle.
The Association of Superannuation Funds of Australia’s (ASFA) Retirement Standard estimates that, to live a comfortable lifestyle, a couple will require $640,000 in savings at retirement, while a single person will require $545,000.
ASFA defines a ‘comfortable’ retirement as one that “enables an older, healthy retiree to be involved in a broad range of leisure and recreational activities”.
A comfortable retirement will also enable this retiree to have a good standard of living by allowing them to buy things like good clothes, a reasonable car, private health insurance, and household goods.
“Members across a wide range of funds have retirement savings that can support a more desirable lifestyle in retirement than has previously been achievable,” the Challenger report states.
We’ve launched a range of new features on your online account, including a calculator to help you work out how much super you could have in retirement and how long it will last.
This calculator can also help you create and compare different scenarios by adjusting your income, super contributions, investment returns, retirement date, and more.
As Challenger noted, however, the super system isn’t perfect – particularly for women.
In fact, according to research from ASFA, 60 percent of the $2.8 trillion in the super system belongs to men, and 40 percent to women.
Broken down, the figures are especially concerning.
ASFA’s research found just 18 percent of Australian women aged between 55 and 59 have saved more than $200,000 for their retirement, compared to 37 percent of men in the same bracket.
What’s more, half of all women in this age bracket will retire with less than $50,000 in their super.
Unsurprisingly, women have a low degree of confidence in their super.
According to the latest Retirement Confidence Index from Qantas Super, just 28% of women feel they can rely on their super and other investments for retirement, compared to 40% of men.
Why the gap?
It’s due to a variety of factors; for example, women are more likely to take time out from work to have children or look after family members, work in casual or part-time roles, and be paid less than their male peers doing the same role with the same experience*.
While some of these factors, like the gender pay gap, are structural, there are a few things women can consider doing to boost their super balance.
*Australian Bureau of Statistics: Average Weekly Earnings, Nov 2017, cat. no. 6302.0
With the cost of living top of mind for many Australians, the 2024 Budget focused on easing financial pressures, however there were also a few proposed measures around super. There are also a couple of previously announced changes to super that will be taking effect on 1 July 2024.
The Superannuation Guarantee is the minimum amount that your employer must contribute to your super, calculated as a percentage of your ordinary time earnings.
Between the Federal Budget and the rapidly-approaching new financial year, this time of year always signals things to talk about when it comes to super.
If you need help with making a decision about your super, you can get simple advice over the phone or face to face. It’s included as a part of your membership so there’s no extra cost.
