The average Australian in their early to mid 60s has a superannuation account balance of just $89,000, while those in their early 50’s have already surpassed this with a balance of $93,000.
The average Australian in their early to mid 60s has a superannuation account balance of just $89,000, while those in their early 50s have already surpassed this with a balance of $93,0001.
"While these figures don’t sound very different they’re quite significant for those affected. In most instances, people in their 60s have finished their full time working life, and their income stream has dried up. While those in their early 50s still have a good decade to work – either on a part time or full time basis," comments Shaun Williams, Aviva’s general manager, group business development.
"Of course it’s never too late for either group, but both age groups really need to look at some quite aggressive savings and investment strategies to ensure they have enough funds for their retirement," says Shaun.
"For those in their 50s, while the balances are going in the right direction it’s important to keep building those savings during your final decade of working. A balance of approximately $90,000 will only generate around $5,500 per annum in return2 – which is better than nothing but not enough to retire in dignity."
The Federal Government has an added incentive for employees over 50 years of age – an age based maximum deductible contribution of $91,149 for the 2003/04 financial year.
Salary sacrifice arrangements may also be entered into, where pre-tax salary or wages are directed to superannuation as contributions and they are not subject to Fringe Benefits Tax. It’s also important to remember the 15% tax on contribution and investment returns is a very attractive proposition when compared to a tax rate up to 48.5% through payroll.
The superannuation balances mentioned above highlight the timing disparity of the Australian compulsory superannuation system between age groups. The majority of 60 to 65 years olds will have to rely on the age pension to fund their retirement because they did not have the benefit of compulsory superannuation savings. Yet, younger baby boomers have a balance which is steadily growing during their additional working years. For those aged 40 to 45 years their average is $55,900, and these people have two decades to keep working and adding to their super3.
The age pension is $11,800 for singles and $19,600 for couples and is means tested. The majority of baby boomers believe they need at least $30,0004 per annum during retirement to sustain a comfortable lifestyle.
"On top of the age pension this will provide for a moderate income for those about to retire but it will probably mean they are going to have give up some of their activities or be very financially careful during retirement," said Shaun.
Right now, 42% of employees aged between 55 and 64 years, and 46% of people aged between 45 and 54, are making personal contributions to their superannuation5.
"These figures are on the increase but it is time everyone realised that they need to be making additional contributions to their superannuation if they want to have a comfortable retirement. In the 55 to 64 age group we should see all employees contributing more to their super – they need to be making a significant commitment to their future retirement," said Shaun.
"I suggest they forget the holiday abroad, building a wine cellar or buying a boat for now. They should simply put super first."
A financial adviser can assist in developing a financial strategy which best suits any age group looking at future retirement or investment needs.
-ends-
1 S Kelly, Forecasting wealth in an ageing Australia – Table A1 "Estimated average family wealth by asset and age, 2000" National Centre for Social and Economic Modelling (Natsem), University of Canberra, June 2003
2 Considers investments of 4%
3 S Kelly, Forecasting wealth in an ageing Australia – Table A1 "Estimated average family wealth by asset and age, 2000" Natsem
4 The Association of Superannuation Funds of Australia Limited, An adequate retirement income, June 2001, Sydney
5 Australian Bureau of Statistics, Income and Expenditure – Sources of Income: employee Super Australia Trends, 2002, Canberra.
For further information please contact:
Simon Morgan
(03) 9829 8892
0407 966 632
Notes to editors:
- Aviva Australia is a group of two specialist financial services companies: Navigator and Norwich Union Life Australia Ltd. Portfolio Partners, the Australian funds management arm of Aviva plc, is a sister company. Through these companies we provide products and services in the areas of wealth creation, wealth management and wealth protection for more than 300,000 customers throughout Australia
- Globally, Aviva Australia is part of Aviva plc, the world’s seventh largest insurance group, the largest insurer in the UK and one of the top five life companies in Europe. Aviva was formed in May 2000 through the global merger of CGU plc and Norwich Union plc
- Aviva is the world’s seventh-largest insurance group and the biggest in the UK. It is a leading provider of life and pensions products to Europe and has substantial businesses elsewhere around the world. Its main activities are long-term savings, fund management and general insurance. It has premium income and investment sales from continuing operations of A$66.08 billion, and more than A$472 billion of assets under management (as at 1 January 2004). The group has more than 59,000 employees and 25 million customers worldwide
- The information in this document reflects Norwich Union Life Australia Limited's (NULAL) and NULIS Nominees (Australia) Limited's ("NULIS") understanding of existing legislation, proposed legislation, rulings etc as at the date of issue. In some cases the information has been provided to us by third parties. While it is believed the information is accurate and reliable, this is not guaranteed in any way. The information is not, nor is it intended to be, comprehensive or a substitute for professional advice on specific circumstances. The securities advice or information given in this document is of a general nature and has not taken into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision on the basis of the advice above, a prospective investor needs to consider, with or without the assistance of a professional adviser whether the advice is appropriate in the light of their particular investment needs, objectives and financial circumstances
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