Future looks bright
Amid the reaction and commentary regarding the second Intergenerational Report released by the Treasurer recently, a delve into the report itself gives us some pretty encouraging projections as to how voluntary and compulsory superannuation savings will help Australia cope with its ageing population structure.
The report forecasts that aggregate superannuation retirement savings will grow from the current level of about $1 trillion (100 per cent of gross domestic products [GDP]) to $2.6 trillion by 2027-28 to some $4.6 trillion (180 per cent of GDP) by the year 2046-47.
Australia already has the fourth largest managed funds market in the world, and the prospective growth will maintain this ranking.
It will also lead to Australia having one of the highest, if not the highest level in the world, of superannuation or pension assets as a percentage of GDP. Most major developed countries have pension assets of less than 100 per cent of their GDP, and they have little prospect of this percentage growing significantly.
The Simpler Super package, to take effect this July, will also lead to considerable savings on age pension expenditures in the longer term. While the easing of the assets test will lead to higher Government expenditures in the short-term, over the longer-term it is projected that the Simpler Super package, together with other developments, will lead to age pension expenditures some $5 billion a year lower than projected in the first Intergenerational Report five years ago.
In particular, the proportion of retirees receiving a full age pension is expected to fall by around 18 percentage points from 54 per cent to 36 per cent, the percentage receiving no age pension to remain about the same at 22 per cent, with the proportion receiving a part age pension increasing by around 18 per cent to 42 per cent.
Retirees will benefit from substantially higher average retirement incomes, and the Government will benefit from age pension expenditures lower than they otherwise would be.
Due to the availability of superannuation and the Simpler Super package, Australia will be in a much better position to cope with the projected increase in the life expectancy of the population. By 2047, a man aged 60 can expect to live to 87.7 years (up from the current 82.6 years) and a woman to 90.8 years, currently 86.1 years.
Taken at face value, the news in the latest Intergenerational Report is good for the superannuation industry and good for an ageing Australia.
Ross Clare is research director at the Association ofSuperannuation Funds ofAustralia.
AUTHOR
Mike Taylor
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