Super is delivering for people about to retire


Contrary to many opinions, super is reducing reliance on the age pension for the large majority of people entering retirement. At the end of December 2018, only 45% of 66-year-olds were accessing the age pension, and only 25% of 66-year-olds were drawing a full age pension.

The average consolidated super balance for Australians aged 60-64 (i.e. those approaching retirement) is now over $300,000. This is far from where the super system peaks, as average balances continue to rise across all age groups as the system matures.

Average consolidated super account balance, by age

Source: Taxation statistics, ATO

The success of super is widespread

The average retirement phase member balance across all large APRA funds at June 2018 was $281,253. These are not consolidated balances, but it is far less likely for a member to have multiple account-based pensions than it is to have multiple accounts in the accumulation phase.

This figure is an average of balances spread across all age cohorts in retirement and will include older retirees who have either spent the bulk of their super or never had much in the first place (only one in five people aged over 75 has a super balance).

Super balances at the household level

Most people enter retirement as a couple, so considering the combined super balances of a couple household in the 60-64 age group is a better measure of how well people are financially prepared for retirement.

The majority of people in the 60-64 age group are part of a couple. The combined super balance of a couple-household will be higher than the average male balance in this age group of $336,360. The average female balance is $278,000, but simply adding these averages together would be misrepresenting the likely true picture. Broken work patterns and part-time work need to be factored in.

This means that a typical couple-household will probably be starting retirement today with more than $400,000 in super.

Who is getting the age pension?

These averages are significant in that they are all above the lower threshold for the age pension assets test of $258,500. This means that the average member in the retirement phase does not get the full age pension.

In 2018, only 42% of age-eligible retirees were on the full age pension. This is an overall average and includes retirees in their 90s who have never had super.

Recent retirees are much less likely to be on the full age pension, with the typical super balance at retirement for a household over $400,000, and most owning their own home. As stated above, Department of Social Services (DSS) data reveal that the majority of new retirees are not accessing any age pension and only 25% of 66-year-olds were accessing a full age pension.

The apparent success of super in building savings at retirement means most people can expect to spend longer in retirement before they receive any age pension.

Age pension access at selected ages, as at December 2018

Source: Calculations based on ABS and supplied DSS data.

Retirees will need access to secure and reliable income

The next phase for large APRA funds will be to make it easier for their members to convert an appropriate part of their super into secure, lifetime income to compensate for their delayed and reduced access to the age pension.

Jeremy Cooper is Chairman, Retirement Income, at Challenger. The full research report by Challenger can be accessed here.

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9 Responses to Super is delivering for people about to retire

  1. Tom July 8, 2019 at 11:46 PM #

    Our sons grew up observing us accumulate super over 30 years in an SMSF. We were very successful until the 2016 budget betrayal taught them and us a lesson about sovereign theft.
    That was the final straw that broke our faith in anything associated with government pledges pertaining to super.
    We were fortunate in that we were at an age we could take it all out and we thankfully did.
    I was a hands on expert in SMSF’s and spent 30 years ducking and weaving through the SIS act. Many years ago I joined the national tax association as trustee of our SMSF and did hundreds of hours on trusts and SMSF regulations. It just got to a level of complexity that was ridiculous. A dog’s breakfast regurgitated.
    Why would anyone now tie their money up for 20-50 years knowing that with the ever changing goal posts you have no hope of being treated in a fair and equitable fashion when you retire. If your self employed invest in your business the tax advantages are better with less regulation.

  2. David July 8, 2019 at 6:58 PM #

    Does college mean university? Or are they using Americanisms in the HILDA survey?

  3. Michael Keane July 8, 2019 at 9:45 AM #

    Using HILDA data from 2001-2016, here are Age Pension take up rates at age 65 compared to age 75, broken down by education level:

    Age 65 Age 75

    College 19% 42%

    High school 44% 74%

    HS Dropouts 50% 81%

    So the pattern that age pension participation is relatively low at age 65, and then rises with age, has been true for a long time. The low participation rate for people who recently turned 65 is nothing new – it’s right in line with the historical pattern. There is no reason to think they won’t rely on the Age Pension more as they get older.

  4. Alfredo July 5, 2019 at 11:19 AM #

    When I came to Australia 40 years ago under the Skilled Migration program, I was told that by the time I reached pension age, the government would look after me in my old age, provided I worked hard and consistently. So I did. In the meantime, I managed to save enough to buy an investment property, which I am still paying off. I sacrificed luxuries, holidays, entertainment, even health issues so I could keep the property.
    Today, I am about to retire and I have been told I will be lucky to access a part-pension.
    I feel cheated and let down by the government and the saddest thing is there is nothing I can do!!!

    • Chris July 7, 2019 at 11:14 AM #

      And you believed them ?!

      This is the same logic that companies had towards our parents (as a Gen-X), that “the company will look after you” before making them redundant at 55 and unable to claim a pension on either the State (already got their company pension and too much money as a redundancy payout) or their own pension fund which they could access at 65.

      So we (Gen X) don’t trust anyone – the Government, the company, no one – except ourselves, to look after ourselves in retirement.

      People would do well to take the same line as me, and yes, I’m a migrant too, which just instilled that even more in me, that “I’m the one who will look after myself”.

  5. davidy July 4, 2019 at 5:44 PM #

    Very interesting stat that only 45% of 66 year olds are now claiming the pension.

    Looks like a result of surging property prices allowing people to downsize/move up the coast with cash in the bank plus the increases in the level of assets before the pension can be claimed.

    • Chris July 7, 2019 at 11:16 AM #

      If you want the pension, you probably won’t get it because you have too many assets.

      If you need the pension, you won’t really want it because it’s essentially, poverty line wages.

      Therefore, the message is clear. Look after yourselves.

  6. John at Clime July 4, 2019 at 11:11 AM #

    Hi Jeremy,

    I believe that you are measuring the success of superannuation using a fairly meaningless measure.

    I think success should be measured by a society creating a pension outcome that ensures all retirees have a standard of living commensurate with living in Australia. It should consider all outcomes of retirement and aging.

    Being not entitled to receive a Commonwealth pension is hardly a measure of success as I would define it.

    It is axiomatic that if the Government imposes a superannuation contribution requirement (decades ago) inside an accounts based superannuation system that people will retire with a balance of money inside their pension fund.

    To move some of these people (retirees) from the Commonwealth age pension entitlement merely requires the Government to lift the assets test entitlement level.

    Adjust the assets test higher and you have more people not entitled. But is the capital that they have accumulated or saved sufficient to give them a reasonable retirement outcome?

    With longevity and aged care requirements coming into play it is arguable that a average couple at 65 years old is underfunded if they do not have $1.5 million at least.

    Unless the government is going to invest heavily in aged care so as to make this pre-death expense affordable then I believe that our superannuation system is a long way short of success.

    Just my view.

    John Abernethy

    • Carlos July 4, 2019 at 11:56 PM #

      agree with John.
      just because someone doesn’t get the aged pension doesn’t necessarily mean they live a comfortable retirement.
      especially the way governments are increasingly changing Super rules to suit their budgets rather than the outcomes of retirees.

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