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This was published 9 years ago
Baby boomers turning to work, government pension as high fees erode superannuation savings
By Julieanne Strachan
Australia's baby boomers are running out of retirement savings early, with many turning back to employment or relying on the pension instead of the comfortable retirement they had been expecting.
A survey of baby boomers – defined as those born in the years following WWII – conducted multiple times over the past 10 years by the Australian Bureau of Statistics has measured intentions and outcomes for workers who wanted to retire and found people were delaying finishing work and were increasingly taking up part-time employment.
Jim Minifie, the Grattan Institute's productivity growth program director, said Canberrans would have some of the highest superannuation savings in the nation.Credit: Greg Newington
Superannuation could not be relied upon as much as the baby boomers expected, the results of the Multipurpose Household Survey for the 2012-13 financial year found.
The Grattan Institute has also warned in its report, Super sting: how to stop Australians paying too much for superannuation, that high fees on superannuation were eating into the nation's savings.
It predicted the average 30-year-old would lose more than $250,000, or about a quarter of his or her total balance, to fees. It said that under a fairer structure at least half that money could be saved.
The federal government's financial system inquiry flagged in its interim report it was considering changes to the $1.8 trillion superannuation sector and it noted Australians were paying high fees compared to other nations.
Jim Minifie, the Grattan Institute's productivity growth program director, said Canberrans would have some of the highest superannuation savings in the nation.
"The ACT has a relatively high per capita income, unemployment is relatively low and the superannuation contributions have been strong because of the public sector,'' he said.
"I would expect the average Canberran would have 10 to 20 per cent above the national average for superannuation savings.''
The public sector superannuation funds also had some of the lowest fees available, which contributed to healthy balances.
The ABS concluded in its report on retirement intentions that in general fewer people had retired in 2012–13 than expected to be when asked about their plans in 2004-05.
"People were most likely to have government pension as their main source of income at retirement in 2012-13, despite most of the same cohort expecting to retire mainly on superannuation,'' the report said.
Mr Minifie said excessively high superannuation fees were hurting taxpayers, who paid more for pensions when superannuation ran short.
He said Australians paid fees of 1.2 per cent on average on their superannuation account balances, which was more than three times the median OECD rate.
However, Association of Superannuation Funds of Australia chief executive Pauline Vamos said other OECD countries operated under different systems and followed different rules of disclosure.
"When you look at those different systems you are not comparing apples with apples,'' Ms Vamos said.
Mr Minifie said the Australian fees meant that on conservative assumptions a 50-year-old Australian today would have his or her super balance reduced by almost $80,000 in fees – in today’s dollars – at retirement.
Reducing fees by half could save account holders $10 billion a year, Mr Minifie said.