Most retirees are better off than we previously thought. Public policy should reflect this.
It’s been a quarter of a century since the Keating government introduced a retirement-income package in 1992 and Vince Fitzgerald reported on national savings in 1993. For a generation, Australian retirement incomes policy has been dominated by their assumptions.
We’ve had a generation of policy thinkers who assumed that people won’t have enough money in retirement. Many fear retirees will be financially insecure, and that the federal budget will not be able to maintain the age pension, which in any case would leave many impoverished. Their solution is a high superannuation guarantee (at least 12 per cent, possibly 15 per cent, of wages), which would ideally be converted at retirement into a lifetime annuity.
So our recent report showing that most Australians are already saving enough for a comfortable retirement came as a shock to the old guard. As is often the case when fundamental assumptions are questioned, and legacies are at stake, the rhetoric has become more heated, and analysis less careful, as with Andrew Podger’s article in the Informant in December, and Paul Keating’s interview on 7.30 in November.
Our most upsetting finding was that Australia’s retirement-income system is already doing its job. Rather than make assumptions about what constitutes a “comfortable” retirement, or repeat assertions that there is a crisis, we looked at how retirees’ actual income and spending compared to the income and spending for the same cohort 20 years ago, before they retired. We found that, across the income distribution, retirees today typically have enough money to sustain the same, or a higher, living standard in retirement as when working. Subjectively, most retirees today feel more comfortable financially than younger Australians who are still working. Some retirees are experiencing financial stress, especially if they rent, but rates of financial stress are much lower than for people of working age.

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