The number of retirees who still hold superannuation at the time of death has been vastly overestimated, with only 20 per cent of those aged over 60 still holding funds at that time, according to Association of Superannuation Funds of Australia (ASFA) research.
The research, published in a paper titled “Superannuation Balances Prior to Death”, which used data from the ATO, Australian Prudential Regulation Authority (APRA) and previously unpublished Household, Income and Labour Dynamics in Australia (HILDA) survey results, runs counter to a finding in the Retirement Income Review report that retirees were only using income generated by assets and not the underlying assets themselves.
“Our analysis suggests that this is not the case. In a number of studies there is considerable survivorship bias, with those still alive and still with superannuation dominating the data that has been analysed,” the paper stated.
Specifically, the research found 80 per cent of people aged 60 and over who died in the period 2014 to 2018 had no super at all in the period of up to four years before their death, and for those aged 80-plus, over 90 per cent had no super in the four-year period before their death.
“The main group having the same amount of superannuation when they died as when they retired are those who retired with no superannuation,” the paper noted, adding only a very small proportion of retirees had a substantial super balance at death.
It noted that while the Australian Bureau of Statistics estimated there were 2.7 million Australians aged 70 and over, ATO data showed 1.7 million had no superannuation at all, and of those who held super, the median balance was within the $100,000 to $149,000 range.
“Only around 185,000 individuals had a superannuation balance of $500,000 or more, with 27,325 individuals (around 1 per cent of those aged 70 and over) having more than $2 million in superannuation,” it stated.
ASFA said these figures were consistent with the HILDA data, which showed that for those aged 80 and above, only 5 per cent had more than $110,000 in superannuation in the period of up to four years before their death.
ASFA chief executive Martin Fahy said the research reinforced calls for the superannuation guarantee rate to increase as currently legislated.
“We don’t have a systemic problem with retirees underspending or bequeathing their super – quite the opposite. The majority of Australian retirees run out of super well before the end of their lives,” Fahy said.
“Sadly this new data indicates that 90 per cent of Australian retirees aged over 80 had no superannuation in their final years. The situation is much worse for women. Eighty-five per cent of women who passed away, aged 60 and above, didn’t have any super left at all.
“The main challenge for the Australian superannuation system is to deliver higher superannuation balances at retirement. The solution for ensuring adequacy of retirement incomes is moving the superannuation guarantee to 12 per cent.”
Work conducted by Rice Warner echoes the ASFA findings with the research group finding the reliance on the age pension through retirement was much higher than reported and retirees were unlikely to be sitting on large sums over time.
