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Slow learners still lag on super

For what seems to be an eternity we have been exhorted by financial planners and advisers to concentrate on superannuation and savings for our future.

Have we listened or learned from this? It would appear not.

Latest research from the Association of Superannuation Funds of Australia suggests that there are still misconceptions relating to the adequacy of the superannuation guarantee charge in respect of retirement.

As ASFA sees it, the main questions to be asked are as follows:

• What constitutes an adequate income in retirement?

• How successfully does the superannu-ation guarantee charge meet the goal of adequacy?

In relation to the first question, ASFA found that there is no universally accepted or agreed target or benchmark.

However, it would seem also that there is evidence of support for a target of approximately 60 per cent of pre-retirement income. This is the most often quoted and understood figure and one that financial planners certainly work towards.

Based upon certain assumptions made in the research conducted by ASFA, they found that a low-income earner would, after a superannuation guarantee charge contribution of 9 per cent for forty years, end up with a retirement income of around 82 per cent of their pre-retirement income.

A full-time worker on an average income (AWOTE) could receive about 60 per cent of their pre-retirement income in retirement after forty years of 9 per cent contributions.

The final conclusions drawn by ASFA in their study were as follows:

• The rule of thumb target of 60 per cent of gross pre-retirement income emerged as consistent with most other benchmarks surveyed

• This target may not be achievable with a 9 per cent superannuation guarantee charge and likely years of contributions. A figure of at least 12 per cent superannuation guarantee charge over thirty years is more consistent with the targets set for retirement incomes and would provide satisfactory outcomes for most workers

• The balance between government, employer and employee provision and the interaction with the age pension, will need to be addressed once a contributions target is agreed.

In essence, the findings indicate that the Vince Fitzgerald warning that the 9 per cent superannuation guarantee charge was insufficient to fund a comfortable and rewarding retirement may well be true.

Perhaps it is time for governments to be mindful of this when creating superannuation policy.

If they had done so in the past, we may not have had the illogical, ill-timed, ill-conceived and irrational legislation that is the superannuation surcharge.

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