The proposed introduction of $1.6 million cap limiting the amount of super that can be transferred into a tax-free pension, will not significantly derail retirement plans for the majority, according to a study by Milliman.
The analysis for a hypothetical 65-year-old pensioner, conducted by an actuarial and consulting firm, proved that there was an almost 94 per cent probability that $1.6 million would be enough to sustain a $50,000 annual income for a 65-year-old male retiree with a life expectancy of 87.
However, the study said that this probability was likely to decline slightly in case of a 65-year-old female retiree because of an expected longer life span of 89.
This income should be still enough to support a comfortable lifestyle, according to the Association of Superannuation Funds of Australia’s (ASFA) Retirement Standard, which estimated a single retire would need an annual income of $43,184 while $59,236 should support the same lifestyle for a couple.
Miliman also conducted a similar analysis for people with longer life expectancy and their chances of sustaining income to age 95 which proved that this longer lifespan would lower the probability that a $50,000 annual income would last until age 95 to 80 per cent.
However, this was still assessed as a positive result.
Additionally, Miliman’s study confirmed that the government’s claim was ‘broadly accurate’ as an $83,000 annual income could be sustained for males with a life expectancy of age 87 around 70 per cent of the time, as there was about a 50:50 chance of sustaining this for a female with a life expectancy of age 89.
