Planning
7 November, 2018 - 01:19 PM GMT

Superannuation myths and truths

Separate the facts from fiction and discover the truth about how superannuation will impact your retirement and that of future generations. Cec Busby reports.

There has been a lot of talk in recent years about Australia’s ageing population and how it may impact on the Age Pension. Many people fear by the time they reach retirement age the Pension will no longer exist. Given the rising cost of living, they also worry they will not have enough super saved for their retirement. Yet the fact is Australia’s superannuation system is amongst the most envied in the world, totalling over 2.6 trillion dollars.  So will you have enough super to rely on? Will the Age Pension evaporate under the pressure of Baby Boomer and Gen X needs or will super save the day?

MYTH: The number of people on the pension is increasing

As more people embrace superannuation as a retirement option, the number of people relying on the age pension is actually decreasing. According to a 2018 report by Canstar, in the last two years alone there has been a 35 per cent increase in the number of Australians aged 65-69 who are accessing their super fund as their main source or retirement income. Simultaneously there has been a decrease in the number of people accessing the Age Pension.

ABS stats suggest over the past twenty years, the number of Australians aged over 65 on the Age Pension and age-related Veterans Pension has fallen from 79% to 70%. It is projected these rates will to less than 60 per cent over the next 30-40 years.

MYTH: Aussies are asset rich and super poor

Despite media suggestions that Australia is a nation of property flippers and share investors, according to the Australia Bureau of Statistics (ABS) the majority of Australian households’ wealth is in the form of their owner-occupied home and their superannuation savings. The ABS states super is the major financial asset of retiree households, and also of households before retirement. 90 per cent of Aussie households cites the family home and their superannuation as their main assets.

MYTH: There are better saving options than super

According to the 2017 Russell Investments/ASX Long-term Investing Report super investments tend to deliver higher returns than investments other than super over a ten-year period.

The report suggests how a diversified, multi-asset strategy can protect investors from one-year changes to returns; regardless of whether an individual is at the top or the lowest marginal tax rate. Returns via super are equal or better in every single category.

MYTH: The Pension is costing taxpayers a bomb

While there is no denying Australia’s ageing population, thanks to our growing passion for superannuation as a retirement option and the introduction of compulsory employer superannuation contributions, the Treasury predicts government’s spending on the Age Pension payment as a percentage of gross domestic product (GDP) will not increase at all in the next 40 years. The Treasury puts the credit for this squarely on the back of our growing super balances, which are offsetting the impact of our ageing population. Without the backing of such strong super, the government would have been forced to increase expenditure on Age Pension.  Super saves the day again!