Superannuation unlikely to be adequate for most workers in retirement

New research from Roy Morgan shows that in the 12 months to October 2018, only 18% of workers with superannuation are currently contributing beyond the compulsory level of 9.5%. This is a potential problem as it is generally recognised that without additional contributions, the current compulsory level on its own, will not provide sufficient funds in retirement for most workers to be self-funding.

These are some of the latest findings from Roy Morgan’s Single Source Survey (Australia) which is based on in-depth personal interviews conducted face-to-face with over 50,000 Australians per annum in their own homes, including over 23,000 workers with superannuation.

Women have closed the contribution gap on men but both declining

In 2009, nearly a quarter (24.5%) of working men were contributing to their superannuation beyond the compulsory level, 21.1% for women. The latest figures for 2018 show that men have declined to only 18.0% and although women have also declined (to 18.1%) they are now marginally ahead of men.

The overall result is that since 2009 there has been a considerable drop in the proportion of workers with superannuation that contribute beyond the compulsory level. This has declined from 23.0% in 2009 to 18.0% in 2018.

Superannuation contributions beyond the compulsory level - By gender

Source: Roy Morgan Single Source (Australia). 12 months to October 2009, n=51,706; 12 months to October 2018, n=50,359. Base: Australians 14+, working full or part time, with superannuation. 12 months to October 2009, n=25,328; 12 months to October 2018, n=23,276.

Under 45s below average contributors

As would be expected, it is the older workers who are getting much closer to retirement that are ramping up their contribution levels. The highest level of beyond compulsory contributions is among the 55 to 64 segment with 35.2%, well ahead of those workers aged 65 and over (30.7%) and the 45 to 54 year olds (24.4%).

All age groups of workers with superannuation under the age of 45 have below average levels when it comes to paying contributions above the compulsory level. The lowest level is 4.0% for those aged 14 to 24, followed by 25 to 34 (9.0%) and 35 to 44 (14.9%).

It is important to note that not only has the total above average contribution level fallen since 2009 but it is of concern that it has declined for all age groups. The biggest declines were in the 45 to 54 group (down 7.9% points) and those aged 35 to 44 (down 6.0% points).

Superannuation contributions beyond the compulsory level - By age

Source: Roy Morgan Single Source (Australia). 12 months to October 2009, n=51,706; 12 months to October 2018, n=50,359. Base: Australians 14+, working full or part time, with superannuation. 12 months to October 2009, n=25,328; 12 months to October 2018, n=23,276

Norman Morris, Industry Communications Director, Roy Morgan says:

“The low level of above compulsory superannuation contributions presents a major retirement funding problem for workers and the government. 

“In addition to the problem relating to the low level of additional contributions, there is the adverse trend that less workers across all age groups are now making additional contributions compared to nine years ago. One of the reasons for this decline is the difficulty of engaging workers in what for most has a very long term time horizon and as a result is likely to involve many rule changes.

“Other financial issues are obviously negatively impacting and are related to competing priorities such as housing affordability, leisure activities, rising household expenses, all in an environment of low wages growth and political uncertainty. It is also likely that the many negative issues coming out of the Finance Royal Commission are contributing to the potential for lower levels of engagement in this market.

“Data used in this release covers only a small part of what is available from Roy Morgan regarding a holistic understanding of superannuation. It needs to be understood in the context of workers income and wealth as it is only forms part of understanding their true financial position. To find out more regarding long term trends, brands and in-depth profiling, simply ask Roy Morgan.”

For comments or more information please contact:
Suela Qemal, General Manager - Financial Services & Consulting
Office: +61 (3) 9629 6888
Suela.Qemal@roymorgan.com