The superannuation adequacy debate was reignited this week following the release of two reports.
Research undertaken by Rice Warner Actuaries for the Investment and Financial Services Association (IFSA) showed Australians faced a substantial saving shortfall, with many struggling to maintain their quality of life in retirement.
The retirement savings gap was now $695 billion compared to $452 billion in 2004, according to the report. This represents an increase of $26,000 per person to $73,000.
"The retirement savings gap faced by Australians is the difference between what is actually being saved and what is needed to sustain a reasonable lifestyle after ceasing work. This latest forecast shows that the gap has continued to grow," IFSA chief executive John Brogden said.
At the same time, the government released the 2010 Intergenerational Report, which showed that an ageing population combined with a slower rate of economic growth spelled long-term challenges for government finances.
According to the report, the proportion of Australia's population aged 65 and over was projected to almost double in the next 40 years. By 2050 there will be 2.7 working-aged people to every person aged 65 and over, down from the current rate of five.
The cost of ageing and health pressures is projected to lead to an increase in total government spending from 22.4 per cent of gross doemstic product (GDP) in 2015/16 to 27.1 per cent of GDP by 2049/50.
The financial services industry used these reports as further proof that the superannuation guarantee (SG) needs to be increased, and fast.
"Almost all of those entering the workforce today and having full careers to the age of 67 will need to contribute more than 9 per cent if they are to maintain their lifestyles in retirement," Brogden said.
The Association of Superannuation Funds of Australia (ASFA) reaffirmed its position that the SG should be increased to 12 per cent so Australians could comfortably fund their retirement.
"An increase in the effective rate of contributions into superannuation . through incentives, assistance and possible compulsion would substantially assist average wage earners," ASFA chief executive Pauline Vamos said.
However, Sydney Morning Herald columnist Ian Verrender disagreed with the industry associations, saying IFSA's research and the body's consequent pleas for the SG to be increased were nothing more than good advertising for its cause.
"As an exercise in spin it was brilliant, successfully deflecting attention away from the main issue using a legitimate argument and research," Verrender wrote.
He said raising the SG was just one component of the solution. He pointed to the financial services industry and said at the moment it did not perform for the benefit of its clients.
"That huge pool of cash is a honey pot into which vast armies of consultants, advisers, brokers, managers and corporations constantly dip their fingers," he wrote.
"What do you think would happen if the super levy was raised from 9 per cent to 12 per cent? You guessed it. The amount of money under management would swell and that would boost management fees."
Despite this opinion, both the reports are timely reminders of the importance of the superannuation system to Australia.
According to the Australian Institute of Superannuation Trustees (AIST), the Intergenerational Report showed that as Australia's compulsory system matured and retirement balances grew, there would be significantly fewer Australians reliant on the full age pension, with proportionally more receiving a part pension.
"This confirms that our system is heading in the right direction," AIST chief executive Fiona Reynolds said.
"There will always be those requiring the safety net of the full age pension, but we are concerned that the proportion of Australians receiving some form of the age pension is not expected to change from current levels."
