Superannuation guarantee (SG) contributions at 12 per cent will allow many people to reach a comfortable living standard in retirement, but women and low-income workers will have to work longer or accumulate more savings to reach that standard, according to the Association of Superannuation Funds of Australia (ASFA).
New data released by the superannuation industry peak body found those earning $90,000 a year from early in their working life had a clear savings advantage compared to those earning $65,000 a year.
The data, which maps the required balances to reach the ASFA comfortable retirement standard of $595,000 for a single person and $690,000 for a couple from age 22 to 67, found that at age 22 a person earning $65,000 needed a balance of $8000 compared to a zero balance for someone earning $90,000.
This difference continued to widen and by age 25 the former needed $29,000 and the latter could still have a zero balance, while at age 35 the lower-income worker needed a balance of $68,000 and the higher earner need a balance of $8000 to reach the comfortable standard by age 67.
The data found this gap started to close by age 40 where the required balances were $162,000 and $113,000 and by age 50 were $284,000 and $249,000, but the impact of lower compulsory superannuation contributions was clear.
“The analysis indicates that while those on a wage of $90,000 a year will potentially achieve the level of savings required to support a retirement lifestyle at the ASFA comfortable level, this will require SG contributions at the rate of 12 per cent of wages for around 35 continuous years,” ASFA stated.
“For an individual on $65,000 a year, SG contributions at 12 per cent would be needed for around 45 years,” the super body noted, adding younger workers receiving contributions for much of their working life at a rate of 12 per cent are likely to reach the comfortable standard.
At the same time, it estimated 50 per cent of Australians will retire at the comfortable level by the year 2050, but balances for women lagged behind those of men from around age 30 onwards, with the median balance for females at retirement around 25 per cent lower than for males.
ASFA used the figures to repeat its call for compulsory SG contributions to be extended to paid parental leave and for the introduction of a super baby bonus where the government contributes $5000 into women’s superannuation accounts upon the birth of a child.