Retirement income

Looking at super wealth at the household level

There's more than meets the eye

Australia's compulsory super system has been in place for almost a quarter of a century. When you look at super wealth more carefully, it is possible to see that the system is enabling retirees to create meaningful amounts of income in retirement.

This new way of looking at super wealth involves a number of steps.

The multiple accounts problem

The most popular figures quoted are of system-wide averages. The average member balance in an APRA fund is $42,000. But the ATO estimates that 45 per cent of people with super have more than one account. This means that when someone looks just at average account balances, they are not seeing the full picture. The ATO can now consolidate a person's super balances; their data show that the average consolidated account balance is $108,000. There is still a gender gap, with average male super wealth of $123,000, and average female super wealth of only $91,000.

Measuring super amounts for pre-retirees

These system-wide data are not helpful in gauging how well-prepared people are who are about to retire. According to ABS statistics, people aged 60-64 have average personal super wealth of $303,000 ($377,000 for males and $215,000 for females). This gives us a better guide to the level of income pre-retirees will have available in retirement through super.

Household formation and spending

In practice, spending happens at a household level. We save up super individually, but most of us spend it jointly in retirement. In the 2011 Census, 75 per cent of people aged 60-64 were in a couple household and less than 20 per cent were living alone. While it is important not to forget the minority of singles and the extra burden they often face, the majority pool household consumption. The payment rates for the Age Pension also recognise this point, with singles receiving proportionately more than each member of a couple (ie $22,805 for a single versus $17,191 for each member of a couple).

Most pre-retiree households already have a significant amount of super

After pooling at the household level, average super wealth was $355,000 in 2013-14, according to the ABS, for households that were headed by someone 60-64 years old. Disregarding those households with no super at all, this average increases to $423,000. The most recent ABS data provides us with an estimate for the typical couple household of $230,000. Given this comes from 2014 data, super funds that are working on assumptions that pre-retiree households have less than $280,000 run the risk of underestimating the lifestyle their members can have in retirement.

We are yet to reach the point where retirees have spent a full working career contributing to super. As the system continues to mature, nearly all Australians will be able to create more income in retirement. This means more spending power, and lifestyle enjoyment, in retirement.

For more information read our full report.