Start fattening that nest egg
BABY boomers have not saved enough for retirement and could face tough government measures aimed at boosting their nest eggs.
BABY boomers have not saved enough for retirement and could face tough government measures aimed at boosting their nest eggs.The government has admitted it cannot fully fund the pension for the unprecedented number of retirees who are set to leave the workforce in the next 10 years.A significant fall in Australian stocks on Friday likely wiped out last year's 8.9 per cent average gain by balanced superannuation funds, where most Australians have their retirement savings invested.It followed the big losses suffered during the 2008 financial crisis, when many superannuation funds were left exposed to the effects of the collapse of the US subprime-mortgage market.The Assistant Treasurer, Bill Shorten, said the government was considering measures that included raising the compulsory employer contribution component of remuneration and reverse-mortgaging to prevent a superannuation crisis.The government was closely monitoring baby boomers' savings patterns for signs of collapse, he said. Many self-funded retirees would benefit from increases to the pension, Mr Shorten said.The number of people age 60 and over still paying off a mortgage had increased from 4.2 per cent in 1996 to 9.5 per cent in 2006, the National Centre for Social and Economic Modelling has said.Another concern was prospective retirees who relied on their super to pay down debt, Fiona Reynolds, of the Australian Institute of Superannuation Trustees, said. Research by the institute had found that more than half of all retirees had taken all or part of their super as a lump sum, Ms Reynolds said."People use their super payout for a holiday, a caravan or a new car or a fridge to last through retirement," Ms Reynolds said. "But I think for the vast majority of people it's used for repaying debt."The Opposition's financial services spokesman, Mathias Cormann, said the government should exercise caution in regulating the way Australians accessed their superannuation."If we said we would reduce choice about how retirees access their savings, there would be an immediate impact on voluntary contributions," he said.