Australian Retirement Threatened By Low Savings

The latest AMP.NATSEM Income and Wealth Report: Saving Tomorrow has clearly shown us that we don’t save enough money for later in life; at a time when most of us would want to enjoy a comfortable retirement.

On average, Australians save a meagre $300 each year. This works out to be only $6/week. Not exactly the money retirement dreams are built upon.

While our household debt to disposable income ratio has stabilised in the last few years, we still remain one of the highest among OECD countries with 155 per cent. Despite the somewhat bleak outlook the research has also uncovered that we are becoming better at saving.

Craig Meller, Managing Director of AMP Financial Services said: ‘The report shows we are getting better at saving but need to do more to ensure we can afford the lifestyle we want in retirement. While more Australians have begun to live within their means, average savings are still very low.’

The report shows that by increasing the SG from 9 per cent to 12 per cent could help solve the issue at hand. It also shows what would happen if we would dispose of the SG for good.

In the first scenario, 15 to 24 year old employees would enjoy $150,000 extra in retirement funds by age 65. This would work out to be an extra $150/week in savings for females with a life expectancy of 84 and $200/week for males with a life expectancy of 79. People currently aged 45 to 54 would also benefit from a bonus of $39,000 by the time they hit 65.

Mr Meller said: ‘Increasing the SG to 12 per cent would significantly lift the adequacy of retirement savings for future generations. For younger people this could mean the difference between enjoying lifestyle benefits in retirement like planning holidays or eating out and having to forgo things they enjoy to pay the bills.’

Co-author of NATSEM, Professor Simon Kelly said the report put a clear picture on the savings behaviour of Australians.

He said: ‘We are seeing signs of a positive shift toward saving and managing debt. As people earn more, for example, the proportion they save is increasing which is an encouraging trend. But we still have a long way to go to improve our overall savings.’

Chief Economist Shane Oliver, AMP Capital said the compulsory super system in place was partially responsible to Australia’s relative economic stability to date. He also said that a 12 per cent SG would enhance Australia’s growth potential over the coming decades.

M Oliver stated: ‘Increasing the SG to 12 per cent would also positively impact the broader economy by further boosting domestic savings and reducing the reliance on foreign savings. It would bolster our ability to finance the mining investment boom and spending on infrastructure and reduce pressure on the pension system and public finances as the population ages.’

Saving Tomorrow is the 25th edition of the AMP.NATSEM Income and Wealth Reports.

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