Retirement income in Australia

Transcription

1 Retirement income in Australia The development of adequacy over time Joint research by Towers Watson and The University of Melbourne Presented by John Burnett 7 July 2015

2 Background Purpose of research Towers Watson and The University of Melbourne are conducting joint research into the adequacy of retirement incomes based on a representative sample of the Australian population providing regular measurement points. This research (which builds on our previous work) has a much wider focus than is often considered, going beyond superannuation savings and age pension support to include other retirement savings outside super as well. Research team From The University of Melbourne Professor Kevin Davis Associate Professor Roger Wilkins Dr Carsten Murawski From Towers Watson John Burnett Nick Wilkinson Data and projection method The research utilises data from the Household, Income and Labour Dynamics in Australia (HILDA) survey to provide retirement projections based on the methodology of the retirement planner that Towers Watson built for ASIC s MoneySmart website. Our sample comprises 5,987, 6,829 and 8,083 persons between ages 25 and 64 in 2002, 2006 and 2010 respectively. 2

3 In this latest research we look at: How do 2002 and 2006 compare with 2010 results? What if future investment returns are lower? 3

4 Proportion achieving ASFA Comfortable % 23% 23% 79% 77% 77% 51% 49% 46% 54% 47% 53% 4

5 Retirement income per annum (2010 dollars) Retirement income per annum (2010 dollars) Distribution of Retirement Incomes 150, , , , , ,000 75,000 75,000 50,000 50,000 25,000 25, % 20% 30% 40% 50% 60% 70% 80% 90% Percentile of Retirement Incomes for ASFA Comfortable () 0 10% 20% 30% 40% 50% 60% 70% 80% 90% Percentile of Retirement Incomes for ASFA Comfortable () 5

6 % change in Retirement income (2010 dollars) % change in Retirement income (2010 dollars) Change in Retirement Income 30% 25% 30% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0% -5% % -5% % -10% -15% -15% -20% -20% 10% 25% 50% 75% 90% 10% 25% 50% 75% 90% 6

7 Retirement Income pa (2010 dollars) Retirement Income pa (2010 dollars) Sources of retirement income $150,000 $125,000 $100,000 $75,000 $50,000 $25,000 $0 $150,000 $125, th percentile 25th percentile 50th percentile 75th percentile 90th percentile Super Age Pension Other Assets ASFA Comfortable $100,000 $75,000 $50,000 $25,000 $ th percentile 25th percentile 50th percentile 75th percentile 90th percentile Super Age Pension Other Assets ASFA Comfortable 7

8 Future pension cost is linked to savings outcomes movement Impact on total retirement income reflecting: +8% +17% - Impact on super and other savings +15% +24% - Impact on age pension income - 3% -8% movement Impact on total retirement income reflecting: - 4% -11% - Impact on super and other savings -14% -15% - Impact on age pension income +18% +8% 8

9 A low return world Expected cash returns + = Expected asset risk premia Expected asset returns Low Average or low Low relative to history 9

10 Low Return Outlook Proportion achieving ASFA Comfortable year low return 23% 20% 77% 80% 47% 53% 52% 48% 10

11 Retirement income per annum (2010 dollars) Retirement income per annum (2010 dollars) Low Return Outlook Distribution of Retirement Incomes 150, , , , , ,000 75,000 75,000 50,000 50,000 25,000 25, % 20% 30% 40% 50% 60% 70% 80% 90% Percentile of Retirement Incomes for low return outlook ASFA Comfortable () 0 10% 20% 30% 40% 50% 60% 70% 80% 90% Percentile of Retirement Incomes for low return outlook ASFA Comfortable () 11

12 % change in Retirement income (2010 dollars) % change in Retirement income (2010 dollars) Low Return Outlook Change in Retirement Income 0% Effect of 10 years low return (2% pa lower) 0% Effect of 10 years low return (2% pa lower) -2% -2% -4% -4% -6% -6% -8% -8% -10% -10% -12% -12% -14% -14% 10% 25% 50% 75% 90% 10% 25% 50% 75% 90% 12

13 Retirement Income pa (2010 dollars) Retirement Income pa (2010 dollars) Sources of retirement income $150,000 $125,000 $100,000 $75,000 $50,000 $25,000 $0 $150,000 $125, LR LR LR LR LR 10th percentile 25th percentile 50th percentile 75th percentile 90th percentile Super Age Pension Other Assets ASFA Comfortable $100,000 $75,000 $50,000 $25,000 $ LR LR LR LR LR 10th percentile 25th percentile 50th percentile 75th percentile 90th percentile Super Age Pension Other Assets ASFA Comfortable 13

14 Future pension cost is linked to savings outcomes Low return outlook Impact on total retirement income reflecting: -7% -9% - Impact on super and other savings -13% -14% - Impact on age pension income +4% +8% 14