Going forward it will be challenging for an individual to achieve account balances in excess of $2 million, according to a new report produced by the Association of Superannuation Funds of Australia (ASFA).
The report, Better Retirement Outcomes: a snapshot of account balances in Australia, has suggested that the only way in which people are likely to achieve a balance in excess of $2 million is if they have a self-managed superannuation fund (SMSF) which holds equity in a small business that markedly increases in value.
It said this was because of the tightening in the concessional and non-concessional contributions caps over recent years.
Releasing the report, ASFA chief executive, Dr Martin Fahy noted other elements of its findings and the need to increase superannuation fund balances in circumstances where people were still likely to be heavily reliant on the Age Pension.
However, he noted that the proportion of new retirees who were fully self-funded had been increasing.
“Hard working Australians aspire to self-sufficiency in retirement and want more than what the Age Pension can provide. They want to be able to have financial security in their old age to cover medical costs, aged care and general expenses,” Fahy said.
He noted that a recently conducted survey had shown that 80 per cent of Australians wanted to achieve ASFA’s Comfortable Retirement Standard, or higher, but that despite the promising growth of account balances, many Australians still faced a retirement savings shortfall.
“The bipartisan, legislated policy of increasing the Superannuation Guarantee (SG) to 12 per cent is by far and away the most critical step to ensuring an adequate retirement for all Australians,” he said.
The ASFA report also calculated average account balance data across all Australian states, territories and electoral regions.
The ACT ($186,743), Victoria ($142,412) and NSW ($133,643) have average balances above the national average of $132,646, while balances are lower in South Australia ($131,914), Tasmania ($126,348), Queensland ($123,636), Western Australia ($119,980) and the Northern Territory ($95,170).
“Levels of retirement savings vary widely across the country,” Fahy said. “Increasing the SG will provide the biggest boost for people in regions with lower balances, who most need the additional savings.”