Voluntary payments vital to meet shortfalls
One of the nation's biggest superannuation funds has urged the government to encourage people to make more voluntary super contributions, saying most working-age people will have inadequate savings to fund a comfortable retirement.
Brad Cooper, the chief executive of Westpac's BT Financial Group, with nearly $60 billion under management, says the current super system will fail to deliver enough to give people a "comfortable" retirement of 65 per cent to 70 per cent of their working-life income.
To lift public confidence in the system, he urged governments to adopt a formal target on how much super should aim to provide in retirement. He also said it was critical that members be encouraged to make more voluntary contributions.
However, he has conceded that tax breaks should cut out once members have attained a certain level of wealth at which they no longer need incentives to save.
After a heated political debate on the removal of super tax concessions in recent months, Mr Cooper quoted former prime minister Paul Keating's comment that super should aim to replace 70 per cent of a member's pre-retirement income. In decades to come, he said super savings would fall short of this target for most people, except for those on about $40,000 who would receive extra government support in retirement.
"While the superannuation system will have $7 trillion in 2033, not every Australian will have what they need," Mr Cooper said.
"Our superannuation system is one of the largest private pension systems in the world relative to [gross domestic product] but it will be a failure for many.
"To shift most super balances towards a healthy income replacement rate, we need to acknowledge the importance of voluntary contributions in our system."
With retirees set to make up a much larger share of the economy in decades to come, Mr Cooper argued it also made economic sense to foster a system that would allow retirees to live comfortably, and spend on services.