Super growth reducing age pension drawdown
Less than half of new retirees accessed the age pension last year and of those who did, only one-quarter drew a full pension, according to new research from annuity provider Challenger, which claims superannuation is working on a mass scale.
The research, released by the Challenger Retirement Income Research (CRIR) team, found only 45 per cent of people who had turned 66 and were eligible for the age pension were claiming it and only 25 per cent of this age cohort were accessing a full age pension.
The CRIR team stated the data, which was drawn from the Department of Social Services from December 2018, also showed 70 per cent of all age-eligible retirees currently receive some form of age pension, but only 42 per cent were on the full age pension, however, this latter figure was an overall average and included retirees in their 90s who never had any form of superannuation.
“The apparent success of super in building savings at retirement is likely to be delaying age pension access for most people. As super balances continue to grow, most retirees can expect to spend longer in retirement before they receive any age pension,” the research said.
The CRIR team claimed superannuation was working on a mass scale and its success in creating retirement savings was not limited to a single sector or a handful of funds.
“While some funds have been particularly successful in building balances for their members approaching retirement, the rising tide of time in the system is lifting average consolidated balances across the system,” the report noted.
The CRIR team added the average retirement-phase member balance across all large Australian Prudential Regulation Authority (APRA) funds at June 2018 was $281,253, but this figure was not for consolidated balances, which were on average for a person with super aged 60 to 64 just over $300,000. When combined at the household level among couples entering retirement, this balance was more than $400,000.
These figures would, however, lead to an interaction with the assets test, which has its lowest threshold starting at $258,500 for a single person and $387,500 for a couple, and where a 7.8 per cent a year taper rate begins.
“This means that the average large APRA fund member in the retirement phase does not get the full age pension,” the report noted, adding access to the pension would increase as they spent their retirement savings from year-to-year.
Jason Spits
June 26, 2019
smsmagazine.com.au
Latest eNewsletters
Hot Issues
- Div 296 sparking death benefit discussions
- ATO warns SMSF trustees to be aware of increase in scams
- Roles and Responsibilities in a Business Partnership
- Beware of tax implications for failing to meet minimum pension requirements: consultant
- Leasing property owned by an SMSF
- A super contributions deadline you won’t want to miss
- How topping up your super each year could leave you $80,000 better off in retirement
- Evolution of Boeing - 1916 - 2025
- ATO issues guidance on SMSF trustee appointment and compliance
- ASIC to increase audit surveillance in 2025–26
- Investment and economic outlook, May 2025
- Legal case has succession planning lessons for SMSF members, advisers: legal expert
- Your 30 June superannuation checklist
- Start-ups to suffer under Div 296
- New SMSF trustees propel uptake of financial advice
- Comparison of various Animal Weight
- $95bn loss predicted to Australian economy if Div 296 passes: analysis
- Why more Australian SMSF owners are looking to global equities
- Investment and economic outlook, April 2025
- Trustees reminded of minimum pension drawdown
- How boosting your super can help you reduce your tax bill
- Are your adult children ready for the wealth transfer?
- Financial abuse move now a certainty
- Freshwater Resources by Country 2025
- Investment and economic outlook, March 2025
- Advisers should be aware of signs of elder abuse in SMSF structures
- SMSFs hold record levels of cash and property
- Trustees warned on early access
- The Largest Empires in the World's History