The federal government will consider calls for countermeasures to any long-term effects a $1-trillion shortfall in Australian retirement savings may have on the budget.
Financial Services and Superannuation Minister Bill Shorten yesterday told InvestorDaily that while the government would not commit to increasing the preservation age at this stage, it would “listen carefully to what the FSC (Financial Services Council) has to say”.
On Tuesday, FSC chief executive John Brogden called for the government to use the Super Round Table to take critical action to minimise the long-term impact of the $1-trillion retirement savings shortfall on the federal budget.
Asked whether he believed the government would take such action, Shorten said: “We think a big reason for the Superannuation Round Table is to look what happens in post-retirement.
“There has been a lot of work go into building up in the contribution phase, but we think there is a lot more work that needs to be done in the drawdown phase.
“At this stage we’re not committing to increasing the preservation age, although we listen carefully to what the FSC has to say, but we have no immediate plans to increase the preservation age.”
Despite his comments, he said the government was interested in what “regulatory tools” were available to help “incentivise” annuities and lifetime products.
“Part of the problem with the longevity gap is that the superannuation system has only really come to something that’s approaching maturity in recent years. It’s only around 20 years,” he said.
“It’s difficult to retrofit superannuation for someone who has been working 40 years.
“Thank goodness we’re increasing superannuation from 9 to 12 per cent.”
He said the question that needed to be highlighted was: “Why does the coalition oppose every idea we have to deal with the longevity gap?”
“They are always happy to tell us about their notorious anti-union views, but why did they vote against 9 to 12 per cent, which is the best solid method to reduce the longevity gap,” he said.
The FSC’s Longevity Savings Gap Report revealed Australians who lived longer than life expectancy faced a total retirement savings shortfall of $1.063 trillion.
It found the shortfall in retirement savings for those who outlived 90 per cent of their peers was $1.227 trillion.
The report, conducted by Rice Warner Research, also found the increase in the superannuation guarantee (SG) from 9 per cent to 12 per cent “helps to significantly reduce” the retirement savings gap, however, it would not be enough.
It said without supplementary savings, the SG would not be enough to provide “adequate benefits” up until life expectancy, let alone to the “75th or 90th percentiles of survival”.
As a result, voluntary contributions to super would remain critical if more Australians were to save for an adequate retirement income, it said.
“Our calculations show that the current funding for superannuation is insufficient to provide the population with their expectations of a comfortable living standard in retirement,” it said.
“As most of today’s working population will receive a part or full age pension when they retire, the gap will be partly closed by the level of government support.”
