THE average level of superannuation savings will not provide retirement incomes for retirees, and the statutory contributions are not much help for baby boomers either.
This is the key message from AMP’s policy manager on superannuation incomes, Suzanne Doyle, in her submission last week to the Senate Select Committee on superannuation.
In the submission, Doyle says the often quoted retirement income adequacy benchmark of 60 per cent of pre-retirement income is unobtainable for baby boomers.
“The average superannuation balance is $57,000 according to our latest income and wealth report,” she says.
“You are not going to get 60 per cent adequacy with balances below $100,000.”
According to AMP, it will take an employee 40 years with the nine per cent compulsory superannuation contribution rate to reach 60 per cent adequacy.
To improve the level of superannuation savings, AMP is proposing changes to the taxation system on retirement savings.
“The best way to tax retirement savings is under an expenditure tax regime,” Doyle says.
“One advantage of this is to crystallise a lot of the changes in recent years and remove grandfather rights, which will make the whole system less complicated.”
Other proposals suggested by AMP include increasing the co-contributions to higher-income groups, making it easier to make voluntary contributions.
The other push is for people to take income stream annuities, rather than lump sums on retirement.
“We urge the Government to reform the current suite of complying annuities, so it can offer investment choice and increase the guaranteed period on a life annuity to 15 years,” she says.
“Something has to be done to make annuities sexier and cheaper.”