Australian boomers are retiring with less than half the money they need

(Bloomberg) — About two-thirds of Australian baby boomers leaving the workforce do not have enough pension savings to retire comfortably, according to research by the industry’s peak body.

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Just over 30 per cent of Australians can afford a comfortable retirement lifestyle, the Superannuation Funds Association of Australia said. The median retirement account balance for men aged 60 to 64 was $205,385 ($137,690) in June 2022 and $153,685 for women of the same age, a short distance from the industry’s accepted comfortable retirement standard of $690,000 for single couples and $595,000 for single couples, .

As the nation’s pension fund approaches A$4 trillion, around 2.5 million Australians are expected to retire over the next decade. Industry pensions – known locally as superannuation – were made compulsory for all workers in 1992, with contributions equal to 3% of wages. The amount employers contribute has risen to 11.5% and will rise to 12% next year.

However, as the pension system matures and balances grow, the proportion of people retiring with enough money to fund a comfortable lifestyle will rise to 50% or more by 2050, ASFA’s chief executive said , Mary Delahunty, in an interview.

“People who are retiring now haven’t had the full benefit of their working lives,” Delahunty said. “So they will still need a good level of government help or help from us to be able to retire with dignity.”

Anxiety about retirement savings persists even though Australia regularly ranks among the best pension systems in the world. About 40 percent of Australians say they will never have enough money to retire, despite the country boasting one of the most envied pension systems in the world, according to a Natixis Investment Managers survey released last week.

“A lot of people are concerned about the comfort and affordability of retirees right now because of the rising cost of living,” Delahunty said.

Balances fell slightly in the 12 months to June 2022 compared with the previous year due to weak investment returns, but since then have averaged an annual return of more than 9%, Delahunty said.

Australia’s pension system is doing its part to reduce the strain on the public budget. A 2023 government report found that despite an aging population, pension spending is expected to fall from 2.3% to 2% of gross domestic product within 40 years, as pensions increasingly fund much pensions.

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However, a gender pay gap fueled pension disparities for each age cohort, Delahunty said. The average salary for men is $182,667, compared to $146,146 for women, according to ASFA.

The lack of financial advisers is also a challenge. The government has announced a number of reform proposals for the sector.

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