The Association of Superannuation Funds of Australia (ASFA) has said the role of superannuation and the need for assistance to low income earners becomes more crucial than ever if age pension eligibility is pushed up to age 70.
ASFA believes such a change – or changing the indexation method to a “less generous approach” – would emphasise the need for superannuation guarantee (SG) contributions to rise to 12 per cent of wages, and for assistance to low income earners in the form of the Low Income Superannuation Contribution (LISC).
ASFA CEO Pauline Vamos said moving from indexing the age pension to the greater of the increase in the consumer price index (CPI) or average wages would make a huge difference to how much age pension individuals and couples get.
“If the age pension had been indexed to only changes in the CPI over the period from the year 2000 to now, the age pension for a single person would now be some $7000 a year less,” she said.
“The ASFA Retirement Standard indicates that a single retiree needs to spend $23,175 a year to support a modest lifestyle in retirement and $42,158 to support a comfortable lifestyle. If only CPI indexation had applied over the last 15 or so years, a single retiree would need around $175,000 more in superannuation savings to support their desired lifestyle in retirement.”
ASFA research showed men who retired in 2011-12 had super balances of around $197,000 while women retired with only $105,000. But only one-third of retirees had over $100,000 in super when they retired.
ASFA believes retirees will fall short in super savings despite contributions rising to 12 per cent of wages and retirees having more in their super balance.
Vamos said she was not yet sure how the raising the eligibility age for the age pension would affect retirees.
“If they are unable to work or choose not to work and do not get any other form of income payment from the government, they would need around $60,000 more in superannuation or other retirement savings,” she said.
