Advice Opportunity

The Australian Government’s decision to abolish the age limit for the Superannuation Guarantee (SG) is a win for working women and older Australians, but also a stark reality check that the ‘retirement dream’ is a vastly different concept from what it was 50 years ago.

The average superannuation balance for females is just $128,598 – almost half the average balance for males ($233,961), according to research by CoreData.

Some 53.0% of women who are mothers say they feel disadvantaged in terms of the super they have been able to save as a result of having to cut down or stop working to raise their children.

Earlier this year, some 49.0% said they would like more flexibility to ‘catch up’ on their super contributions, a wish that has now been granted.

Late last week, Bill Shorten, Assistant Treasurer and minister for financial services and superannuation, announced that the SG Age Limit would be abolished from 1 July, 2013. Currently, the SG only applies to people under 70.

He also announced a rise in SG from 9% of employees’ salary to 12%. The relaxation of the rules around SG will allow women greater opportunity to save for their retirement, regardless of whether their careers are punctuated.

However the changes are also reflective of just how much the world is changing, for today’s youth – the retirees of the future.

As the retirement age increases and benefits once promised only to the working youth are extended to working seniors, it’s entirely possible that some of us will never stop working.

Watch these changes on the video below. (Our calculations are based on the assumption on a retirement age of 65. While this may be seen as conservative in light of the above and the increase in Age Pension qualifying age from 2017, the findings are startling and highlight the huge opportunity for advisers in servicing this growing pool of retiree assets).

Right now, Baby Boomers make up just over one quarter of the labour force (27.73%), however by 2026, they will make up just 5.37% and by 2031, some 18.6% of the working population will be Baby Boomer Retirees.

This is more than any other generation ever observed that will be retired, and if you incorporate the Generation X’s, who will hit retirement age in 2031 but could start retiring before then, that’s more than 20% of the workforce.

Advisers have been focusing on the older demographic for some time, with Boomers making up more than two fifths of advisers’ client bases, and Pre-boomers accounting for around one fifth.

The SG increase will only increase the attractiveness of retirement coffers, however the growing opportunity in the Gen X and Y markets should not be ignored either.

Gen X is forecast to reduce from 29.2% of the working population today to just 21.4% in 2031, while Generation Y will increase from 25.9% of the labour force today to almost one third (31.09%) in 20 years’ time.