Retirement income gap less than expected

25-Aug-2016

By Sarah Kendell

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New research commissioned by the Australian Institute of Superannuation Trustees (AIST) has revealed the majority of retirees do not spend as much as expected in retirement, suggesting the government’s proposed changes to superannuation tax concessions may not have a major impact on the ability of retirees to fund their lifestyles.

The report, “Expenditure patterns in retirement”, was developed by Monash Business School’s Australian Centre of Financial Studies using 12 years of Household, Income and Labour Dynamics in Australia survey data up until 2014.

It suggested 80 per cent of the 8000 retiree households surveyed only spent up to the level considered to provide a ‘basic’ annual living standard in retirement – couples spent $43,226 a year on average while singles spent $23,797.

AIST chief executive Tom Garcia said learning more about retirees’ actual expenditure in retirement would help the government and super industry come to evidence-based decisions about adequacy and super policy.

“There are a lot of myths and fear about what retirees need to live on,” Garcia said.

“This study suggests that most older households, including wealthy ones, have relatively modest expenditure and – on average – have the highest financial satisfaction.”

An AIST spokesperson told financialobserver the results would appear to further justify the government’s proposed reforms to super tax concessions, as it was clear those at the top end of the scale were not being crunched from an income perspective.

“We need to ensure that generous superannuation tax concessions are used for the purpose of retirement, rather than intergenerational wealth transfer or other purposes,” the spokesperson said.

AIST elaborated that more still needed to be done to increase the equitability of the system, with the research showing 8 per cent of retirees were beginning their retirement with a home loan still to pay off.

“We need to make sure people have as much superannuation as possible so if they are left with some debt they are able to clear it and still draw an income,” the spokesperson said.

“Steps like moving to 12 per cent and the continuation of the government’s super boost for low-income earners will make a difference.”

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