Mind the glaring super gap

Most Australians have insufficient funds for retirement. Eventually, Canberra will have to make it harder to access lump sums and super to pension conversion will be mandatory.

There is a glaring gap in the Australian superannuation movement that few people want to talk about.

In an era of longer life expectancy, the majority of Australians do not have sufficient funds to retire on.

On the bright side, we can pat ourselves on the back for ranking third out of 20 countries in the fifth annual Melbourne Mercer Global Pension Index, published by the Australian Centre for Financial Studies in conjunction with Mercer. The credit for our high ranking goes to Paul Keating, who introduced the national super scheme in the first place and has been at the vanguard ever since.

But all this tells us is that most other countries are worse. The top two countries, Denmark and the Netherlands, have tackled the retirement problem in a much better way than Australia. .

All too often Australians retire with their superannuation lump sum and arrange their affairs so that they maximise access to the government pension.

There are few retirement products to help to convert a lump sum into an income stream, and the process is not helped by the low interest rates.

The problem has also been made worse by severe restrictions on how much can be contributed to superannuation.

About half of those who take a pension from superannuation do so via a self-managed fund.

Eventually the government will make it harder to access lump sums and make conversion of superannuation to a pension scheme mandatory.

That will come at a time when there is a severe squeeze in the budget, but it will be incredibly unpopular and may cause the party which takes that action to lose office at the next election.

Nevertheless, we can take great comfort from the fact that we rank third in the Melbourne Mercer survey, which covers 55 per cent of the world’s population. The bottom five countries in the survey are our neighbours: China, Japan, South Korea, India and Indonesia. Maybe we can help them.

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