Projecting the adequacy of Australian retirement incomes - for whole of population, income and gender groups

George Rothman
Publication type


Paper presented to the Nineteenth Colloquium of Superannuation Researchers, University of NSW, 14 & 15 July 2011.

Treasury's RIMGROUP model has been used to prepare revised estimates of aggregate adequacy for both the whole Australian population and for subsets by gender and income. This analysis is based on the latest version of RIMGROUP which incorporates the Better Super Reforms, the 2009 age pension changes, the GFC, and recent and foreshadowed government policies on superannuation including the proposed increase in the superannuation guarantee from 9% to 12%. The paper updates similar analysis presented to the 15th Colloquium in 2007.

Much of the published material on retirement income adequacy in Australia is of a hypothetical nature, projecting, for example, the projected income replacement rate for an individual of given gender, income and superannuation saving rate retiring in say 37 years time. Over recent years more analyses have tried to cover the entire Australian population or large sections of it. The aggregate analyses presented here use a comprehensive cohort based model to cover the range of labour force experiences including part time work, differing retirement ages, differing total superannuation contribution rates by age, gender and income and the contribution of savings outside superannuation. The evolution of the retirement income system and changing replacement rates over time is explicitly shown.

As noted, there are now a number of aggregate models presenting public findings in this area, notably the IFSA/FSC 'Saving Gap' model, the AMP retirement income model and increasingly dynamic microsimulation modelling by NATSEM. The paper discusses how different model structures, and particularly key assumptions, can markedly influence results and conclusions. The current average expenditure replacement rate for Australian retirees is estimated at just over 60% but is projected to rise to over 80% in around 20 years. Over the longer term replacement rates for women overall are projected to exceed those of men, in some income ranges exceeding those of men by a substantial margin.