Retirement adequacy – a grim outlook for Australians

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Sydney, 31 March 2014 – Research by leading global professional services company Towers Watson (NYSE, NASDAQ: TW) and The University of Melbourne has found a significant number of Australians are unlikely to achieve adequate retirement incomes, even when all sources of savings are considered.

Based on data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey, and targeting Australians aged 40 to 64 in this first tranche of the research, only 53% of couples and 22% of singles surveyed are on track to have a comfortable level of retirement income, as based on the ASFA Retirement Standard.

The research demonstrates how Australians in this age group are heavily reliant on retirement savings outside superannuation and the age pension. If non-super retirement savings are excluded, the levels drop to just 32% of couples and 11% of singles on track to achieve a comfortable level of retirement income. If the age pension is also excluded, only 15% of couples and 5% of singles are expected to meet the standard.

John Burnett, senior consultant with Towers Watson in Australia said: "The research highlights how important it is for superannuation fund members to be aware of their projected retirement income but this information is currently not being provided regularly by most funds. While super savings are only part of the equation, this is the logical starting point; members then need to take retirement income from other sources into account. Online calculators and financial planners are unlikely to solve this gap alone, unless more members become aware of the shortfall they may be facing.

"Towers Watson has consistently advocated providing all superannuation fund members with a retirement projection each year as a significant step in reaching and educating the widest possible audience. We're excited that more funds are looking at giving their members these valuable insights."

The research hinges on determining a fixed dollar amount as a target retirement income, based on the ASFA Retirement Standard ‘Comfortable' level. This is currently $57,655 for couples and $42,158 for singles.

Burnett continued: "We found the projected retirement income of couples in this demographic was much higher than for single people. Couples on the median retirement income are expected to reach 100% of the target retirement income if superannuation, the age pension and other retirement savings are all considered. So that means more than 50% of couples are on track for a comfortable retirement if you take all the factors into account. We must also remember that not everyone surveyed will aspire to achieve this level of income in retirement."

In contrast, the median projected retirement income for singles is only expected to reach 68% of the target. Even when superannuation, the age pension and other retirement savings are all considered, the median projected retirement income for singles is still $12,393 per year below the target income level.

Associate Professor Roger Wilkins from the Melbourne Institute at The University of Melbourne said single people are also going to be more heavily reliant on the age pension than couples. "The research indicates that between ages 65 to 90, the age pension will provide 61% of the retirement income of single people and 39% of the retirement income of couples. Moreover, 96% of single people and 89% of couples aged 40 to 64 today are expected to receive at least a partial age pension at some stage during retirement."

The retirement projections allow for compulsory superannuation, voluntary superannuation, the age pension and other retirement savings not held in superannuation. The projections use the same approach as the retirement planner that Towers Watson built for ASIC's MoneySmart website, but extended to account for the additional information available through the HILDA Survey.

Notes to editors

The research was carried out by John Burnett (senior consultant) and Nick Wilkinson (consultant) from Towers Watson's Retirement team and Professor Kevin Davis, Associate Professor Roger Wilkins and Dr Carsten Murawski from The University of Melbourne. The research projects the retirement income for 5,124 individuals aged 40 to 64 residing in 3,519 households. The research is ongoing and will cover other age demographics, to be released throughout this year.

Information about the HILDA Survey

The research uses data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey collected in 2010. This survey is funded by the Australian Government Department of Social Services (DSS) and is managed by the Melbourne Institute of Applied Economic and Social Research (Melbourne Institute). The findings and views reported in this research, however, are those of the authors, and should not be attributed to either DSS or the Melbourne Institute.

While the HILDA Survey collects information from surveyed households each year, there is detailed information on household assets and debts collected every four years (Wave 10 in 2010 being the most recent) which has been used in this research. This includes information about superannuation balances, voluntary superannuation contributions, other savings and investments.

Towers Watson has produced a comprehensive paper on this first stage of the research, which is available here.

About Towers Watson

Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organisations improve performance through effective people, risk and financial management. The company offers consulting, technology and solutions in the areas of benefits, talent management, rewards, and risk and capital management.  Towers Watson has more than 14,000 associates around the world and is located on the web at

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