Post by Banjo on Oct 22, 2011 8:21:58 GMT 7
Markets forcing retirees to work after $75bn paper loss in superannuation
BABY-BOOMER retirees are being forced back to work, with workers having almost nothing to show for contributing $430 billion to Australia's compulsory superannuation pool since the global financial crisis.
As Australians continue to contribute 9 per cent via employers' compulsory schemes, topping that up with voluntary contributions, the rolling crisis in equity markets has cancelled out any growth in their nest eggs.
Australia's total pool of super now stands at $1.34 trillion, up $162bn since June 2007, four years ago.
Across this period, net contributions from employers and employees are estimated at $237bn, meaning Australians are at least $75bn out of pocket on paper.
The numbers are for the financial year ended on June 30 and do not take into account the heavy losses in the sharemarket since then, amid the European debt crisis.
But financial advisers stress Australians who are considering selling up their holdings now will only lock in losses, compounding the pain and potentially missing large returns when equity markets eventually improve.
The plunge in portfolios has forced a record number of Australians over the age of 55 back to work. Data compiled by The Weekend Australian suggests that many of the 500,000 jobs created in the economy between August 2008 and 2011 went to older Australians, most notably to women working in aged, health and child care, and to older men in the professions.
Former Reserve Bank governor Bernie Fraser said the figures backed his hunch that the GFC had "frightened the pants off people, especially those nearing retirement".
The hit to nest eggs has been exacerbated by the flood of personal contributions Australians made after Howard government treasurer Peter Costello announced in the 2006 budget that pre-retirees could contribute an extra $1 million into their super funds until June 30 the following year as an undeducted contribution - that is, without paying extra tax on it. That attracted an extra $95bn of personal contributions to super just before the GFC hit.
The previous year, members had shovelled an extra $33.2bn into their super but the Costello measure saw that number almost jump threefold, dwarfing the $66bn of employer contributions in the same year.
There are still incentives for savers to make voluntary contributions of their own to super accounts, but they are not as generous as Mr Costello's offer.
Independent super consultant Warren Chant said he knew many people whose self-managed super funds lost between 20 per cent and 40 per cent in 2008. "The 5 per cent that most balances lost in the tech wreck in 2002 was regarded as the biggest loss in living memory," he said.
He noted that, even in the Depression of the 1930s, few people lost more than 5 per cent in a year.
"Now, self-funded retirees, indeed all retirees, are doing it tough," he said.
Mr Chant said he had seen three attitudes to the new post-GFC retirement environment.
"Some people have decided to keep working while others who have already retired have decided to get by on less," he said.
"There's a third group of retirees who are maintaining their previous level of consumption and hoping that things get better."
Bunnings chief executive John Gillam said the rate at which older workers were hired was continuing to increase as retirees looked to return to the workforce, either out of boredom or in search of greater financial security. He said retaining workers past normal retirement age was also a priority.
Figures released recently by the Association of Superannuation Funds of Australia show the average super account balance in 2009-10 was $71,645 for men and $40,475 for women. For those at retirement, average payouts in 2009-10 were approximately $198,000 for men and $112,600 for women, while in 2005-06 they were only $136,000 for men and $63,000 for women.
ASFA chief executive Pauline Vamos said last month that average retirement payments at the end of June were likely to have reached $250,000 for men and $145,000 for women. She said that, while those sums would fund a modest lifestyle, they would not be enough for a comfortable lifestyle in retirement. For a comfortable lifestyle, assuming part receipt of the age pension, the lump sum figures required at retirement were about $430,000 for a single and $510,000 for a couple.
www.theaustralian.com.au/business/wealth/markets-forcing-retirees-to-work-after-75bn-paper-loss-in-superannuation/story-e6frgac6-1226173590785
BABY-BOOMER retirees are being forced back to work, with workers having almost nothing to show for contributing $430 billion to Australia's compulsory superannuation pool since the global financial crisis.
As Australians continue to contribute 9 per cent via employers' compulsory schemes, topping that up with voluntary contributions, the rolling crisis in equity markets has cancelled out any growth in their nest eggs.
Australia's total pool of super now stands at $1.34 trillion, up $162bn since June 2007, four years ago.
Across this period, net contributions from employers and employees are estimated at $237bn, meaning Australians are at least $75bn out of pocket on paper.
The numbers are for the financial year ended on June 30 and do not take into account the heavy losses in the sharemarket since then, amid the European debt crisis.
But financial advisers stress Australians who are considering selling up their holdings now will only lock in losses, compounding the pain and potentially missing large returns when equity markets eventually improve.
The plunge in portfolios has forced a record number of Australians over the age of 55 back to work. Data compiled by The Weekend Australian suggests that many of the 500,000 jobs created in the economy between August 2008 and 2011 went to older Australians, most notably to women working in aged, health and child care, and to older men in the professions.
Former Reserve Bank governor Bernie Fraser said the figures backed his hunch that the GFC had "frightened the pants off people, especially those nearing retirement".
The hit to nest eggs has been exacerbated by the flood of personal contributions Australians made after Howard government treasurer Peter Costello announced in the 2006 budget that pre-retirees could contribute an extra $1 million into their super funds until June 30 the following year as an undeducted contribution - that is, without paying extra tax on it. That attracted an extra $95bn of personal contributions to super just before the GFC hit.
The previous year, members had shovelled an extra $33.2bn into their super but the Costello measure saw that number almost jump threefold, dwarfing the $66bn of employer contributions in the same year.
There are still incentives for savers to make voluntary contributions of their own to super accounts, but they are not as generous as Mr Costello's offer.
Independent super consultant Warren Chant said he knew many people whose self-managed super funds lost between 20 per cent and 40 per cent in 2008. "The 5 per cent that most balances lost in the tech wreck in 2002 was regarded as the biggest loss in living memory," he said.
He noted that, even in the Depression of the 1930s, few people lost more than 5 per cent in a year.
"Now, self-funded retirees, indeed all retirees, are doing it tough," he said.
Mr Chant said he had seen three attitudes to the new post-GFC retirement environment.
"Some people have decided to keep working while others who have already retired have decided to get by on less," he said.
"There's a third group of retirees who are maintaining their previous level of consumption and hoping that things get better."
Bunnings chief executive John Gillam said the rate at which older workers were hired was continuing to increase as retirees looked to return to the workforce, either out of boredom or in search of greater financial security. He said retaining workers past normal retirement age was also a priority.
Figures released recently by the Association of Superannuation Funds of Australia show the average super account balance in 2009-10 was $71,645 for men and $40,475 for women. For those at retirement, average payouts in 2009-10 were approximately $198,000 for men and $112,600 for women, while in 2005-06 they were only $136,000 for men and $63,000 for women.
ASFA chief executive Pauline Vamos said last month that average retirement payments at the end of June were likely to have reached $250,000 for men and $145,000 for women. She said that, while those sums would fund a modest lifestyle, they would not be enough for a comfortable lifestyle in retirement. For a comfortable lifestyle, assuming part receipt of the age pension, the lump sum figures required at retirement were about $430,000 for a single and $510,000 for a couple.
www.theaustralian.com.au/business/wealth/markets-forcing-retirees-to-work-after-75bn-paper-loss-in-superannuation/story-e6frgac6-1226173590785