Issue: 16
Sent: 31-10-2005 00:16:25
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She'll be right - Lester Wills
Australia has make significant progress with retirement savings, particularly in relation to a number of other countries. The trouble is, because of its success, some people think it is perfect and therefore we do not have a problem. The Australian system is by no means perfect and unfortunately has major problems.
More than 80% of Australians over 65 receive age pension or equivalent payments such as service pensions. Pressure is likely to increase on income support programs as a greater proportion of the population reaches retirement age and more retirees live longer. The move towards early retirement further increases this pressure.
The strength of these trends can be seen in the labour force participation data for older men. In the twenty years to 1998 labour force participation for men aged 55-59 dropped about 11 percentage points, the fastest rate of decline in the OECD. Men aged 60-64 dropped about 14 points on a lower base.
This trend is of concern for several reasons. The loss in tax revenue from people retiring early is compounded if their post "retirement" lifestyle is funded by superannuation that was intended for use after the age pension age. In the OECD Economic Survey report on Australia it was noted that potential pressure on income support programs are likely to increase if greater proportions of superannuation savings are used prior to the age pension age of 65.
The system of compulsory contributions to superannuation has forced Australians to save for their retirement. Unfortunately, due to severe limitations on people gaining access to their superannuation savings and the desire to ensure that money is not used prior to retirement, significant sums of money have become "lost or unclaimed".
The ATO estimate the amount of lost super to be almost $6 billion and this figure is growing by almost $1billion every year. What's more, due to the fact that not all superannuation funds report monies as lost accounts, it is possible that this figure is even higher.
When people have small account balances, it is relatively easy in the current system to lose super. Unfortunately, those who keep losing their super do not build up their account balances and so they remain small. Because they are small, it is relatively easy to lose the money, because they keep losing track of their money etc. etc.
But don't worry because she'll be right!
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