Most Australians who plan to retire in the coming 12 months will rely, to some extent, on government support to provide them with a retirement income.
Roy Morgan Research has published its latest retirement intentions survey, reporting that an estimated 439,000 people will retire in the next year. This is a 6 per cent increase on the 2018 level of 414,000 and 11 per cent above the 2017 figure of 395,000.
The figures suggest that there are still a number of retirement income policy settings that government needs to get right.
Despite anecdotal evidence to the contrary, the age at which people plan to retire is coming down. The average age of intending retirees fell from 62 in the 2018 survey to 58 in the latest survey.
Measures designed to encourage people to stay in the workforce longer don’t appear to be working.
The number of intending retirees has increased despite modest growth in personal wealth over that period. Roy Morgan says the savings levels of intending retirees are well below the recommended level for self-funding in retirement.
The average gross wealth of intending retirees is $299,000, which is only 2 per cent higher over the past two years. The average debt of intending retirees is $27,000, leaving them with net wealth of $272,000.
In calculating its wealth figures, Roy Morgan excludes the owner-occupied residential property. It includes superannuation, property investments, other direct investments, deposits, pensions, annuities and managed funds.
The Association of Superannuation Funds of Australia estimates that an individual would need savings of $545,000 to generate enough income for a “comfortable retirement”, and a couple would need $640,000.
Last year, actuary Michael Rice presented a paper at an Actuaries Institute conference, in which he looked that what would happen if an “excess value” was designated for family homes above a certain amount and that excess value was included in the Age Pension assets test.
The home downsizing rule that was introduced last year, which allows people to top up their super with the proceeds of the sale of the family home, is the most recent attempt to get people to release equity from their homes.
The available evidence suggests that the policy has had a lukewarm response and is not enough on its own to get retirees to use the equity in their homes to fund their retirement.