Australians who believe $1 million is enough for a comfortable retirement are in for a rude shock, according to one of the leading providers of retirement incomes.
Superannuation industry veteran and chairman of retirement income at Challenger, Jeremy Cooper, said if the typical $1 million nest egg was used to buy a lifetime income in the current interest rate environment, it would fetch about $1297 a fortnight – the same as the government pension.
"Assumptions and assertions that $500,000, or even $1 million, in super, in the current environment, will guarantee a comfortable retirement are suspect," Mr Cooper, chairman of retirement income at Challenger, argued
"The brutal reality is that a fair price for an age pension in today's interest rate environment is around $1 million. For that amount, a couple will get $33,717 of income a year. A comfortable retirement would cost more."
Debates about superannuation tax concessions risked misleading the vast majority of Australians who view their superannuation in terms of lump sum payouts instead of reliable income streams, he argued.
Mr Cooper's statement comes after the government's intergenerational report found that by 2055, Australians' life expectancy would have climbed to 95.1 years for men and 96.6 for women, compared with 91.5 and 93.6 for people born today – reflecting the need for more retirement planning.
Current low bond and interest rates would severely affect the returns of investors, many of whom are preparing for a lump sum windfall instead of steady income.
Pauline Vamos, chief executive of the Association of Superannuation Funds of Australia, agreed $1 million is not an adequate amount for a comfortable retirement and said super assets below $2.5 million should not be taxed – to boost their savings. There was also not enough focus on setting up reliable income streams, she said.