Many Australians are heading  for a less than comfortable retirement  unless the federal government moves  to increase the Superannuation  Guarantee, after new research  revealed there is a big hole in what  we have saved and what we will need  for a comfortable retirement, writes  JOHN BROGDEN

In both the retail and nonprofit  sectors of the superannuation  industry, fresh studies are coming to  the same conclusion; committing 9  per cent of salary toward retirement  will result in most Australians  failing to reach a level of savings  required to meet their lifestyle  expectations when they retire.  The latest modelling done for  IFSA by Rice Warner Actuaries  has found a retirement savings gap  of $695 billion.

The Rice Warner Research  conducted for the Investment and  Financial Services Association  (IFSA) reveals the gap between  what Australians have saved for  their retirement and what they will  need for a reasonable lifestyle has  increased significantly.  The retirement savings gap has  blown out by $243 billion to $695  billion, an increase of $26,000 per  person to $73,000 per Australian.  In fact for people in midcareer,  in almost all cases, the SGC  regardless of the percentage will not  be sufficient to provide adequate  retirement income.

Rice Warner did a number of  individual case studies to illustrate  its findings. The report looked  at a 22-year-old woman earning  $40,000 a year who works until 27  and then takes five years off work to  start a family. That woman will miss  out on $63,700 in superannuation  or 26 per cent of her super balance  and will never be able to recover  that lost money.  In fact, the time she takes off  work puts her so far behind that  she needs to double her current  super contributions to 18 per  cent just to achieve a reasonably  adequate life after work.

Compared to a 22 year-old  man who also earns $40,000 a year  but does not take a five-year break,  the woman at retirement age has  $227,000 less super than the man.  The 9 per cent contribution rate  is completely inadequate to provide  Australians with a reasonable  lifestyle once they finish work, and  the time has come for the Federal  Government to look at increasing  the compulsory contribution rate to  at least 12 per cent.  The ACTU has asked for  an increase to 15 per cent, while  some sectors – such as tertiary and  defence – pay as much as 18 per  cent and 20 per cent.

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