Superannuation over the past decade:
Individual experiences
A joint research project between ACFS and AIST
Professor Kevin Davis
Research Director
Australian Centre for Financial Studies
Overview
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The HILDA survey: what is it, what can we learn?
How do super balances differ across individuals?
Individual perceptions re super and retirement
Financial comfort and satisfaction
Individual super balances – evolution since 2002
Determinants of super balances
Conclusions
Questions
1.
2.
3.
4.
How much super does the average 50 year old male have?
How much super does the average 50 year old female have?
What is the average of super/wages for a 40 year old male?
What super/wages would a 40 year old male need to avoid
relying on the old age pension?
5. For single retirees over 70, what is the average value of
assets?
6. What proportion of that is superannuation?
Questions
7. What % of retirees class themselves as poor or very poor?
8. What has greater impact on financial self assessment: extra
house value or extra super?
9. At what age (on average) do women in their late 40s plan to
retire?
10. What percentage of employees make additional super
contributions?
11. What percentage of singles aged below 50 have zero super?
Questions
12. What % of employees don’t know the employer super
contribution rate?
13. For males in their mid 50s (at 2010) did their super grow by
more ($’s) over 2002-2006 or 2006 -2010?
14. What proportion of total assets is super for couples aged 5060?
15. In comparing two otherwise identical individuals, if A has
$10,000 more annual income than B, what would be the
expected difference in super balances?
HILDA
• Annual survey, since 2001, of “same” households
– Economic, social aspects, family dynamics, labor market
– Initial survey was 7,682 households (19,914 individuals)
• Questions about super asked in surveys (“waves”)
in 2002, 2006, 2010
• Analysis here based on almost 9,000 respondents
involved in all three “super waves”
Sample Distribution
Age and Gender Distribution
Number of Respondents
250
200
Female
Male
150
100
50
0
23
33
43
53
Age (2010)
63
73
83
Non-retiree average super balances: 2010
Average Super Balances (Non-Retirees) 2010
$250,000
Males
$200,000
Females
$150,000
Biased
by
early
retirees
$100,000
$50,000
Age Group
-6
5
63
-6
2
58
-5
7
53
-5
2
48
-4
7
43
-4
2
38
-3
7
33
-3
2
28
-2
7
$0
23
Little
gender
differences
On track for retirement?
Even for young
age groups
ASIC’s retirement
calculator shows
retirement income
deficiency and
significant reliance
on age pension
Super Balances/Wages: Males employed full time
5
Ratio
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
25-34
35-44
45-54
Age Group
55-65
Retiree Finances: What about the house?
Average Super and House Value: Single, Home owner, Retirees
$1,200,000
$1,000,000
Super
House
$800,000
$600,000
$400,000
$200,000
$54
58
63
67
71
75
79
83
87
Retiree self assessment (zero super)
Prosperous
Very comfortable
Reasonably comfortable
Just getting along
Poor
Very Poor
Single non
home
owners
0%
11%
43%
40%
3%
3%
Couple
non home
owners
0%
5%
46%
48%
1%
0%
Couple
home
owners
0%
12%
61%
21%
5%
0%
Non-retiree financial self assessment
• Median response = “reasonably comfortable”
• Super has twice the effect of home value
• Increased super has more effect than equal
percentage increase in current income
• For same satisfaction (a) couples need more wealth
and income than singles, (b) no sign of age effect (?)
• Results generally consistent with theory and with
ME Bank Dec 2011 survey
Retirement Intentions
Optimistic ?
But later
than in 2006
Males
72.0
Females
70.0
68.0
66.0
64.0
62.0
Age
65
63
61
59
57
55
53
51
49
47
45
60.0
43
Intended Retirement Age
Retirement Intentions 2010
Preparing for Retirement?
Employees – do you make extra contributions?
2002 2006 2010
No – only receive employer contributions
75
71
74
Yes – occasional lump sum contributions
1
5
4
Yes – make regular contributions
24
25
22
Preparing for Retirement?
Singles: Percentage with zero super: 2010
100%
90%
80%
Percenage
70%
Even if
self-employed
why no super?
(Very few couples
with zero super)
60%
50%
40%
30%
20%
10%
0%
23
33
43
53
Age
63
73
83
Individual Awareness: Employer contributions
Don’ t know
less than 9 per cent
9 per cent
greater than 9 per cent
2002
21%
14%
55%
10%
2006
18%
5%
65%
12%
2010
12%
3%
72%
13%
Individual super accumulation over time
Super Balances over time: Males
$250,000
Average for age group
$200,000
$150,000
2002
2006
2010
$100,000
$50,000
$23-27
28-32
33-37
38-42
43-47
Age at 2010
48-52
53-57
58-62
2006 to 2010 change
not as good as
2002 to 2006 change
for older workers
with higher balances
Individual super accumulation over time
Super Balances over Time: Females
Labor force
absence?
$120,000
Average for Age Group
$100,000
$80,000
2002
$60,000
2006
2010
$40,000
$20,000
$23-27
28-32
33-37
38-42
43-47
Age at 2010
48-52
53-57
58-62
Super or the House?
Couples - Average Super/Assets
0.3
0.25
0.2
0.15
Super/Assets-2002
0.1
Super/Assets-2006
0.05
Super/Assets-2010
0
<30
30-40
40-50
50-60
Age Group at 2010
60-70
>70
A Success Story
Average Super Balances - Male Non-retirees
(series smoothed using 5 year moving average)
250000
2002-Males
2006-Males
2010-Males
200000
150000
$
In 2002, a 55 year
old had less super
than a 50 year old.
100000
50000
Now…
0
23
28
33
38
43
Age
48
53
58
Determinants of Super Balances
• Education matters (independent of income etc)
• Gender per se not a determinant – it is incomes,
time in labor force (which are gender related) which
matter
• Super balances (in 2010) are about $1,600 higher
for each $1,000 higher income level
Conclusions
• Improved, but inadequate, provision for retirement
apparent.
– 9% v 12%; impact of labor force gaps for women’s super
• Improved understanding of retirement income system, but
some major deficiencies in knowledge and expectations.
– Voluntary contributions; retirement intentions; zero super
• Disincentives to use of housing wealth for retirement
consumption should be a policy concern.