AUSTRALIA - The retirement savings gap in Australia still stands at A$452bn, despite having narrowed 15% during the past three years, research by the Investment and Financial Services Association (IFSA) has found.
IFSA economic savings and tax board committee chairman David Deverall, said the nation was moving in the right direction, but stressed the key to further success was improving voluntary savings through incentives, such as lowering front end taxes on super contributions, which could half the current deficit.
The research showed the gap was about $93000 per person.
The projected response to reducing front-end tax would create an increase in superannuation savings of $2.51 for each dollar of tax foregone over the next 70 years, said Deverall.
“The bottom line is that if the contributions tax were removed altogether, the retirement savings gap would fall to less than half its current size,” he said.
The introduction of the government’s co-contribution scheme would primarily benefit lower income Australians and women in particular, with the latest government figures showing that over the past two years, 1.51 million people have responded to the co-contribution incentive to help close their personal retirement savings gap, with younger people in particular very well represented as co-contribution recipients, said Deverall.
“This equates to more than $1bn added to superannuation accounts and shows that IFSA’s research and advocacy for this measure is based upon sound methodology.”
According to IFSA’s Policy Options for Retirement Incomes and Long Term Savings document, Australians had a $600bn retirement savings gap between their reasonable expectations for living standards in retirement and the amount they will have accrued by their current rate of savings in 2003.
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