Many Australians fear they won’t have enough money to retire on, but a new study says that’s not so.
The Grattan Institute research found the vast majority of retirees today and in future are likely to be ‘financially comfortable’.
‘Even after allowing for inflation, most workers today can expect a retirement income of at least 91 per cent of their pre-retirement income – well above the 70 per cent benchmark endorsed by the OECD,’ it said.
Grattan CEO John Daly also argues low-income Australians will effectively get a pay rise when they retire, through a combination of the age pension and their compulsory superannuation savings.
‘The financial services industry ‘fear factory’ should be shut down, because it encourages Australians to worry unnecessarily about whether they’ll have enough to retire on,’ he said in the report released on Wednesday.
But life could certainly get tougher for the poorest Australians, who are on low incomes, or don’t work, and rent their homes.
To boost retirement incomes for the poorest Australians, the report calls for a 40 per cent increase in the maximum rate of Commonwealth Rent Assistance – worth more than $1,400 a year for a single retiree.
The Grattan Institute also calls for legislated increases in the superannuation guarantee awarded to workers, which will rise to 12 per cent from a current 9.5 per cent, to be scrapped.
Workers would be earning the full 12 per cent by July 2025, at a cost of $2 billion a year.
The report argues this will ultimately cheat workers because it would ‘take away more money from working-age Australians that could be used to pay down the mortgage’, potentially leading to larger household debt in retirement.