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Ralston responds on super balances of older Australians

The ASFA Report on Superannuation balances prior to death: superannuation balances of older Australians released in March 2021 points out that many older Australian have very little, if any superannuation. ASFA concludes that this supports a case for “increasing the Superannuation Guarantee (SG) to 12% (as currently legislated) so that retirees can live in retirement with dignity.”

The fact that many older retirees have very low superannuation balances is hardly surprising. While the SG was introduced at 3% in 1992, it did not reach 9% until 2012. As the Retirement Income Review* says:

"The maturity of the superannuation system influences the level of assets people hold when they reach retirement and how much they rely on the age pension. Australia’s superannuation system will have matured by the 2040s, when the SG will have been at least 9% for 40 years (the average length of a working life). Most people entering retirement over the past five years have only had around 20 years of superannuation accumulating at relatively low rates.” (RIR p.116)

There are also a significant number of Australians who retire without superannuation. According to a 2015 Productivity Commission (PC) report, around 20% had no superannuation at preservation age, which would include those not in paid employment, the self-employed or those under the $450 per month SG threshold.

The fear of running out of money

By retirement, this grew to around 40%, and by the age of 70, 60% of Australians had no superannuation. Many of these people are not exhausting their savings, but rather they are making lump sum withdrawals around preservation and retirement ages. In 2011-12 around 30% of superannuation assets were taken as lump sums by the current cohort of retirees (PC, p.81). For those with small balances it may make sense to pay down debts, purchase white goods or a car, and otherwise prepare for retirement. Residual funds are often held as term deposits.

Increasingly, as balances grow more retirees elect to establish an account-based pension at retirement and take their superannuation as an income stream.

People are cautious about spending down their retirement savings and many fear 'running out of money'. They often live frugally in the belief that they should be financially responsible, preserving their capital and only spending returns and dividends.

There is also a lack of understanding about access to 'social transfers in kind', that is, health, aged care, tax benefits, concessions etc, which constitute what is essentially a fourth pillar of the retirement system. The average value of such benefits is greater than the full age pension for people over 65 (RIR, p.134).

Despite ASFA’s claim that “there is little or no evidence that the typical Australian dies with around the same amount of financial wealth as when they retired”, multiple sources provide substantial evidence that retirees die with the majority of their retirement savings unspent.

Sources include independent research institutes, government departments, and a large superannuation fund, as outlined in the RIR. Many of the studies in this robust evidence base rely on longitudinal analysis, following people and cohorts over time and observing their spending patterns.

These sources consistently find that current superannuation drawdown patterns are conservative with at least half of all retirees drawing at the minimum rate. Data from one large superannuation fund shows that members with income streams die with around 90% of their starting balance. This was the case even for members who live to life expectancy. Fund members aged 80-90 who died in 2020, when balances were subdued due to the pandemic, died with 82% of the balance they had when entering retirement.

The real challenge

It is clear that in the absence of any guidance or advice many retirees lack the knowledge, confidence and support to spend their savings, resulting in a poorer quality of life in retirement.

This is the real retirement income challenge. The superannuation system to date has focussed strongly on accumulation, rather than retirement income. A sound retirement income system will see well-informed older Australians use retirement savings in an efficient manner to maximise their wellbeing.


*Retirement Income Review, The Commonwealth of Australia The Treasury, July 2020. (All data in this article unless specified otherwise are drawn from the Review)


Dr Deborah Ralston is a Professorial Fellow at Monash University, where she is a member of the Steering Committee for the Mercer CPA Global Pension Index. She is a member of the Reserve Bank of Australia Payments System Board and holds several non-executive director roles. In 2019 Deborah was appointed by the Treasurer Josh Frydenberg to the three-member panel for the Retirement Income Review.


John Chambers
May 01, 2021

I am curious about Ms Ralston's conclusion that many retirees have a "poorer quality of life in retirement". Did Ms Ralston or any of the RIR members actually speak to retirees who suggested this was the case; and if so how many? Alternatively, is it simply a conclusion based on an analysis of numbers etc? If the latter then with respect it is no more than an educated guess.
No one would quibble with the notion that people are entitled to obtain appropriate advice and guidance regarding their financial affairs. But drawing the conclusion that a failure, or inability, to do so leads to a "poorer quality of life" is simplistic and arguably offensive to retirees who live their lives frugally and wish to behave in a financially responsible manner.

Kenneth Beer
May 02, 2021

Bill Chambers, are you referring to Dr Ralston?

bernard treston
April 27, 2021

Deborah Ralston summary is accurate and supported by evidence
Bernie Treston
Qld President
Association Independent Retirees

April 27, 2021

Bernie : You say "Deborah Ralston summary is accurate and supported by evidence Bernie Treston , Qld President, Association Independent Retirees , April 28, 2021". What has that got to do with it? That is her opinion and no one disputes that! On the other-hand, Dudley says :"RIR sez: 'retirees dying with wealth intact'. ASFA sez: 'the vast majority of retirees have reduced their superannuation balance to zero', 'a large majority having no superannuation'. April 24 , 2021. Singing from different statistics [song-sheets] : RIR; wealth..... ASFA super....Super is not all of wealth." Bernie, it is two different views of the same issue using two different sets of information, and therefore, surprise! surprise! reaching TWO different conclusions. The RIR is attempting to include all wealth along with 'super' into one bundle for distribution. They have gone beyond the 'super' issue altogether and are trying to tie any and all the other assets into "the super pot" ASFA has stuck to the point and what they say is valid and factual. Most retirees have little or no 'super', or have used it up , but some have a house. So now they are being told [by the RIR] that this is also 'up for grabs' and this should be 'monetised' and utilised and in my opinion the RIR has overstepped the mark on this issue. Throwing caution to the winds is NOT wise at any time but is more reckless and poignant for the elderly to risk their house "so that retirees can live in retirement with dignity.” Instead....they are being told that they are ignorant! "It is clear that in the absence of any guidance or advice many retirees lack the knowledge, confidence and support to spend their savings, resulting in a poorer quality of life in retirement." "A sound retirement income system will see well-informed older Australians use retirement savings in an efficient manner to maximise their wellbeing."....just as long as they are prepared to chuck-in the house and forgo THAT security that makes retirement a worthwhile ambition!! That is just plain wrong and rude !

Craig M
April 27, 2021

There is a lack of unbiased financial advisers. Thats the problem. We need independent advice and options that are not in the adviser's interests. Someone should write a book and update it regularly using both small and large balance options.

Shiraz Nathwani
April 24, 2021

Well said Ian
"They are not scared to spend, but have made the choice that their peace of mind and sense of satisfaction is more important than buying stuff."
Goal has to be "Enjoy your Retirement" We Save We Spend be Our Choice.

April 24, 2021

Due to the Senior Australians and Pensioner Tax Offset (SAPTO), a retired couple can earn $57,948 and a single retired person can earn $32,279 and pay no tax. This tax offset effectively provides a higher tax-free threshold than available to other taxpayers, thanks to John Howard’s generosity in 2000 in pursuit of the grey vote. This tax offset operates independently of any tax-exempt income from super which does not appear on a tax return.

Accordingly, a couple could have $965,800 and a single person could have $537,980 in assets outside super earning 6% and pay no tax. Therefore, retired people can hold considerable wealth outside super and have the same tax advantages without the regulations associated with super. It may provide an incentive to deplete super balances well before death.

Clearly, a person’s super balance is a poor indicator of that person’s total wealth because it does not include the range of assets, including the family home, held outside super.

April 24, 2021

"Due to the Senior Australians and Pensioner Tax Offset (SAPTO), a retired couple can earn $57,948 and a single retired person can earn $32,279 and pay no [income] tax.":

Couple: 2 * $30,592 = $61,184.
Single: $33,898.

"thanks to John Howard’s generosity in 2000 in pursuit of the grey vote":

No free money [aka Age Pension] for self funded retirees. Tax reduction due to SAPTO at incomes above:
Couple: 2 * $2,011.32 = $4,022.64
Single: $2,705.58
- cheaper by far for government than paying Age Pension to all age eligible.

April 23, 2021

RIR sez: 'retirees dying with wealth intact'.
ASFA sez: 'the vast majority of retirees have reduced their superannuation balance to zero', 'a large majority having no superannuation'.

Singing from different statistics: RIR; wealth. ASFA super.

Super is not all of wealth.

Age Pension SweetSpot: Income is $37,341.20 / y pension + $8,216.00 / y other income = $45,557.20 / y; tax = $0. Assets $401,500.

Current Deeming Rate = 2.25% (yield on Government Guaranteed TD = ~1%).
The non-Age Pension SweeterSpot assets = $45,557.20 / 2.25% = $2,024,764.44

No compelling reason for vast majority of retirees to leave their capital in super except inertia and misinformation.

They can withdraw the lot, taking super to $0, while preserving their wealth without paying tax, and, in addition, receive the Age Pension if they stuff all but $401,500 into their Principal Place of Residence. Each $1 reduction of assessable assets increasing Age Pension by $0.078 / y for most.

BTW: it's a capital stream (withdrawal of savings), not an income stream.

April 24, 2021

With over $2M investable, a retiree will get a much better return than the deeming rate. I would suggest comfortably 5-6%. This outcome is better than sinking most of it into your home and relying on a pension surely? A couple of years of living expenses set aside in cash ensures you’re not a forced seller in a market downturn. Market volatility shouldn’t be equated with risk, if properly planned for.

April 24, 2021

"better than sinking most of it into your home":

A return of 6% and inflation of 2% on investible capital shifts the SweeterSpot to $1,504,246.99

Increased capital of:
= 1,504,246.99 - 401,500.00
= 1,102,746.99
for more risk and no more reward.

Market volatility results determines sequence of returns risk.

Jon Kalkman
April 24, 2021

Dudley has correctly identified the age pension sweet spot. Under the assets test a couple who own their own home can have $401,500 before their age pension is reduced. The pension is reduced by $3 per fortnight (or $78 per year) for every $1000 over that threshold. That means the pension is reduced by more (7.8%) than that extra capital can earn in most cases. By placing any excess capital in their family home, which is not an assessable asset, they maximize their age pension of $37,340 and earn possibly 6% on their allowable capital ($401,500) giving them a total income of around $62,000. By most people’s definition, that total income is a comfortable retirement.

The problem is that it is only the family home that is not assessable. It means that there can be no spare cash in the system to cover unexpected expenses. For example, holding an additional cash deposit of $100,000 will reduce the age pension by $7800 but only earn an additional $1000 in a 1% term deposit. Alternatively, they can have the full age pension with $100,000 in cash and only $301,500 invested.

Your retirement lifestyle is defined by your income, not the size of your family home. That is why many retirees on a part-pension (couples who own their own homes with capital between $401,500 and $880,500) are happy to forego some age pension in exchange for access to available capital that gives them the flexibility to spend as they please. As the family home is a very illiquid asset, capital invested in it not so readily available in emergencies.

April 24, 2021

Agreed! The point I was attempting (badly) to make, was that surely one is better off with readily accessible capital, rather than having it embedded in the family home where it is difficult and costly to access.

Furthermore, as the burden of pensions continues to fall onto a smaller taxpayer base, and greater demands for a lot more money to be spent on aged care and disability, governments may be forced to change the rules with regard to exemption of the entire value of the family home from the pension means test.

Call me cynical if you like but I’ve little trust in government and aim to be self sufficient. As for what is an adequate retirement income everyone is different. Some would struggle to live out their retirement aspirations on $62,000, yet for others it would be nirvana! Truly blessed perhaps the person with few wants or needs!?

April 22, 2021

I too have some considerable difficulty in some of the assertions made by Dr Ralston. Especially around retiree knowledge, confidence, support, caution and fear of running out of money. And in fact around the whole notion of focusing on retirement incomes. Reeks of the nanny state wanting to control citizen outcomes to death and beyond. From my point of view, life is a complex web of activities where almost every person is quite different in capabilities, desires, drive and ambition and hence outcomes. To get to my point on superannuation, most people are linked to families who are themselves at different stages of the life cycle. This means that at a certain age or maturity we perhaps want to leave work for other pursuits. But with enough financial clout to fund our lifestyles. We want to be in a position to financially help our families should they see an opportunity or get into strife. We want to have funds for health and old age needs or a new car or a new house or a new holiday or for following generations to live better than we did. The superannuation industry should be agnostic on accumulation and retirement, aiming to maximise funds for all to consume or grow. And Government policy should be around the amount of money we could be putting aside for later and about drawdown rates. It appears that we need more injected at the front end so yes run it up to 12%. We already have reasonable drawdown rates established. Leave the rest alone to mature further. Let me and my advisors be the judge of how to maximise my wellbeing

John Noreiks
April 22, 2021

The comment that the current industry focus is on returns within the accumulation phase is correct, once you get past the compliance & fees costs ( which are not insignificant in a world of lower returns ). Add to this the financial advice industry at best is as per Alan Kohler's recent article summarizes, this industry including the governing body's self interest with the investor last. The government ( MP's and Bureaucrats) including advisory groups are generally far removed from reality to a point where they cannot add value to the challenge of the 98% of retirees and would add I have no faith in any of the current parties getting this right. If there was a better option then many retirees would vote for that better option. Best Advice for many would be to educate yourself, so self is in charge of self's destiny. For the 1 or 2% whom have gazillions they are fine as well as their friends in the political parties or government.

April 22, 2021

I manage my super wisely, trying to preserve my capital and only spend my investment returns. My reason for this and what frightens me about running out of money, are the things out of my control. A predictable volatile future with negative and low investment returns, also major market downturns that are created by GFC's and Pandemics. Why should I be told or forced to spend up big and waste my lifetimes savings, when I don't know what's around the corner that will deplete my super. My plan is to protect my capital and live comfortably for the next 25 years. If there is a reasonable balance left over, why not pass it on to children and grandchildren? The Gov't will still get their 17% in super death benefit taxes. After all it is my money that I have saved over 45 years and have already paid taxes along the way.

Robert Goodwin
April 22, 2021

What do the majority of retirees spend money on in their 80s and 90s? If they own their own home their needs are minimal. They don’t buy new cars or travel overseas for expensive holidays. They live frugally in line wither needs. They also probably scared of the aged care home issue and the cost of moving into that. Most were frugal during their working lives and that’s why they are self funded now. As a 70 year old who started my pension at 55 the trick was to manage my retirement funds (until now ) so that I can feel comfortable for the future.

April 22, 2021

Yes Ian !
They already have ALL THE STUFF they want and are usually "shedding it" to all and sundry !
The spending is mostly on relatives , friends and travel at the tail-end of life !
And most people want to leave a legacy too , if they can !
The attempt to brow-beat them into "spending the lot" is just another way of
the Government trying to get more money released into the economy ....for whatever
purpose that may serve !

April 22, 2021

"People are cautious about spending down their retirement savings and many fear 'running out of money'. They often live frugally in the belief that they should be financially responsible, preserving their capital and only spending returns and dividends...."

Part true and part nonsense. Of course people have a fear of "running out of money" - they have lived through massive inflation, they do not trust Canberra and it is perfectly natural to become more cautious as you age!

"Only spending returns and dividends..." is rubbish. The minimum mandated drawdown increases from 4% to 5% to 6% to 7% to 9% to 11% and a whopping 14% if you make 95! Clearly that is greater than interest + dividends so they are forcibly depleting their Super and they will spend it!

April 23, 2021

"they are forcibly depleting their Super": Correct.
"and they will spend it!": Not forced to spend.

Jeff Oughton
April 22, 2021

Agree with the conclusion of the "real challenge" above, but

1. when will the govt take direct action and/or introduce innovative policies to change the behavioural biases of elderly asset rich Australians living on baked beans?
2. recognise the private market failures in the product and advice markets and intervene - e.g.. fix up its own PLS and enter these inefficient private markets ?

April 21, 2021

Superannuation was readily available before the SG was introduced in 1992.
I commenced work in 1956 and every job I had provided superannuation usually on a 50/50 contribution basis.The problem was that most people cashed out their super every time they changed jobs. I retired in 2007 with a substantial income stream, drawdown the minimum amount each year and now well into my 80s my accumulation Account is more now than when I started.
No problem my legacy will be generational wealth for my grandchildren.

Paul Kibble
April 21, 2021

Many of today’s retirees are from an age where thrift was the norm, things were repairable and you were brought up to live within your means. And even though a retiree has ample money to live on, it is difficult to overturn a lifetime’s habit.

April 21, 2021

"It is clear that in the absence of any guidance or advice many retirees lack the knowledge, confidence and support to spend their savings, resulting in a poorer quality of life in retirement"

The above statement taken from the body of the article is true if one is only considering the material side of retirement. I would put to you that many retirees, probably a minority, but deserving acknowledgement, live within their means, not because they are frightened of running out of money, but rather that they derive a great sense of pleasure and independence from having a nest egg that was built up from very small beginnings to something quite substantial over a few decades.
The psychological benefit in the knowledge that will not only, not run out of money, but are prepared for whatever life may throw at you, is not to be dismissed. These retirees live frugal lifestyles by choice, while holding millions of dollars in their SMSF and get great pleasure from doing so. They are not scared to spend, but have made the choice that their peace of mind and sense of satisfaction is more important than buying stuff.


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