Australia pensions facing shortfall 'disaster'

Workers are facing a A$695 billion (US$614 billion) shortfall between what they are saving for retirement and what they will need, the Investment & Financial Services Association said today. The savings gap, calculated using superannuation fund balances at June 30, 2008, has jumped 54 percent since 2004 and precedes investment losses from the global financial crisis.

The Australian government tomorrow will publish a report looking at the pressures rising health-care and energy costs will put on the nation as its population ages and the proportion of tax-paying workers declines. The unfunded pension liabilities of Australian state governments surged 53 percent to A$74.3 billion last year, Rice Warner Actuaries said Jan. 8.

“We are facing a disaster in retirement savings,” association Chief Executive Officer John Brogden said on a conference call with journalists today. “The situation is worsening, and these figures are prior to the main effect of the financial crisis.”

Today's report, based on work by Sydney-based Rice Warner, sets 62.5 percent of pre-retirement earnings as the threshold for an adequate retirement income.

People earning more than A$120,000 a year are assumed to be self-sufficient in retirement, while those earning A$30,000 are deemed to be entirely dependent on state assistance. It also assumes the government lifts the qualifying age for state pensions to 67 years from 2023.

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