Women face an even bigger hurdle to $1m nest egg

As the debate rages over whether the claim that $1 million is needed to fund a comfortable retirement is either a "myth" or a "conservative benchmark", experts from all sides have warned that women in particular must take a more active role in managing their superannuation goals.

"Averages are helpful for the broad policy debate but they can be dangerous when taken in isolation," National Australia Bank head of client management Lara Bourguignon said.

"If the growing public awareness of the forecasts that a super balance of $1 million could be required to fund a comfortable retirement is causing people angst then they should find out if they will have enough to retire on, and if the answer is no then start taking practical steps to do something about it".

More women need to become more engaged with decisions about their superannuation, she said. On average, Australian women retire with about half the super balance of men, at just $100,000 compared with $200,000.

The latest quarterly MLC Wealth Sentiment Survey, released on Tuesday, indicates while Australian women have greater financial anxiety around retirement income shortfall, they also give less consideration than men to forward planning.

"We want all Australians to enter the retirement phase of life feeling confident and prepared. More than half of those surveyed are still concerned they do not have enough to fund their retirement," Ms Bourguignon said.

On average, Australian women retire with about half the super balance of men, at just $100,000 compared with $200,000. Photo: Jessica Shapiro

"Our research found 37 per cent of women are giving very low consideration to potential future financial setbacks. This indicates that while anxieties around retirement planning dwell on the minds of Australians, women in particular are still unsure [about>[/embedp>

A report released on Monday – produced by the Australian Institute of Superannuation Trustees in conjunction with the country's largest industry fund AustralianSuper, titled Busting the $1 million retirement myth – warned the claim that Australians need more than $1 million in superannuation to fund a comfortable retirement is a myth being perpetuated by "vested interests" that risks undermining confidence in the system.

Challenger head of retirement incomes Jeremy Cooper and Yellow Brick Road chairman Mark Bouris are among those who have warned in recent months that a tightening of the age pension eligibility test and a lower investment return outlook means a $1 million super balance will soon be needed to ensure a comfortable retirement for a couple.

Those estimates are extrapolated from data produced by the Association of Superannuation Funds of Australia (ASFA), which calculates $640,000 as the amount currently needed to guarantee a couple who own their own home an annual income stream of $58,000 – the amount its research shows is needed to finance a "comfortable" standard of living.

ASFA chief executive Pauline Vamos defended criticisms of the group's projections as alarmist, arguing that it provides a practical benchmark against which people can start making informed decisions to plan for their future.

"Most people will retire with a balance that is enough to afford them a modest lifestyle, but most people would prefer to live the sort of lifestyle in retirement that means they need to save quite a bit more," Ms Vamos said.

"The purpose of the ASFA standard for retirement incomes is to provide real data about how much money, on average, retirees spend and what they spend it on, so they can start thinking seriously about how to manage any gap between how much income they want in retirement and what they are likely to be able to afford."

Super tax breaks for women

BT Financial Group boss Brad Cooper recommended last week that the government should consider taxing women's super contributions at a lower rate to help them catch up.

He acknowledged that introducing gender discrimination into the tax system would be unconstitutional and suggested the government could investigate getting around this by delivering the concessional tax rate via a rebate or offset placed directly into a woman's superannuation account.

Mr Cooper also called for Indigenous Australians to be allowed to access their super earlier to reflect lower life expectancies.

"These solutions might be complex and controversial, but the fact is, until we have fixed the 17 per cent gender pay gap; until we address the health issues [affecting>[/embedp>

He made the proposals in a wide-ranging speech that outlined his vision for retirement incomes policy, including a call to cap the amount of money people can save within the tax-friendly vehicle of superannuation at $2.5 million.

Sydney Morning Herald