Australia’s baby boomers are fast become our retirement boomers.
The impact on Australia’s savings will be breathtaking over the next few years as increasing numbers of baby boomers retire.
However, many people may not yet realise the extent of change that is occurring.
The latest Superannuation Market Projections, a much-followed heavyweight report published biannually by Rice Warner Actuaries, forecasts that post-retirement superannuation savings will “grow spectacularly” over the next 15 years.
Rice Warner forecasts that the retirees’ share of the superannuation asset pool will climb to 36% by June 2025 – up from 30% today.
While the predicted percentage rise may not seem so spectacular, consider the actual dollars. Rice Warner expects that in 15 years time, superannuation post-retirement savings alone will have reached $1.036 trillion in today’s dollars. This compares to the total of today’s pre and post-retirement super savings of $1.229 trillion.
A combination of factors is at work that will lift Australia’s super savings in retirement. These are the rapid ageing of the population, the growing maturity of the superannuation guarantee system (SG) and the increasing recognition among retirees of the attractiveness of a super pension in preference to a lump sum.
Unfortunately for Australia’s retirement savings, many people enter retirement with a large amount of consumer debt, accrued during their working lives. In turn, super is often used to repay these debts.
This highlights that one of the rewards for keeping consumer debt under control throughout a person’s working life and hopefully paid off before leaving the workforce will be to have higher retirement savings than otherwise would be the position.