The Financial Services Council (FSC) has urged the federal government to take swift action to counter any long-term effects a $1-trillion shortfall in Australian retirement savings may have on the budget.
The FSC yesterday released its Longevity Savings Gap Report, which 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."
FSC chief executive John Brogden labelled the report's $1-trillion shortfall finding as "astonishing".
"It's critical that the government uses the Super Round Table to act now to minimise the long-term impact on the shortfall on the federal budget," Brogden said.
"We commend the government for legislating 12 per cent superannuation contributions effective by mid-2019. However, this will not solve the gap for the current workforce, which is the basis of our report.
"The time is right for the government to implement robust policies to address the retirement savings shortfall."
He said extending working lives would have a dramatic impact on retirement savings, with the research revealing that for every additional year Australians worked, the national super savings gap was reduced by $200 billion.
"With life expectancy now 79 for men and 84 for women, compared with 73 for men and 80 for woman in 1992 when the superannuation guarantee was introduced, the time has come to consider whether the superannuation preservation age of 60 is appropriate," he said.
"Currently, many Australians have to wait seven years from the time they retire to the time they can access the age pension. Reducing this time to five years will ease the financial pressure for Australians to have enough to live on in their retirement."
The Longevity Savings Gap Report is an extension to the FSC's Retirement Savings Gap Report.
Both reports modelled what level of aggregate savings was required so Australians could enjoy adequate incomes in retirement, or 62.5 per cent of their pre-retirement income, it said.
