Paper presented at the Seventh Colloquium of Superannuation Researchers, University of Melbourne, 8-9 July 1999.
The RIMHYPO model has been used to study the retirement incomes of hypothetical individuals and couples with different incomes and subject to different workforce patterns. Using a definition of replacement rate based on comparison of real expenditure after and before retirement, an assessment is made of the adequacy of retirement incomes arising from the full development of the Government’s Superannuation Guarantee (SG) arrangements.
The hypothetical analysis is complemented by an aggregate analysis based on the RIMGROUP model which covers the entire Australian population, and their range of experiences.
The paper concludes that the age pension and fully implemented SG systems combine to provide replacement rates above frequently used benchmarks, even for low income workers with broken work patterns. While higher income earners have lower replacement rates with SG only superannuation savings, the aggregate analysis shows that taking realistic full saving rates into account, the higher income groups generally also achieve replacement rates exceeding 60%.
Aggregate analysis by income level also shows that the evolution of the system has a major positive effect in relation to replacement rates over time for both lower and upper deciles. Women workers have similar replacement rates to men.
As background to the analysis, the paper reviews recent data on contributions to superannuation. It concludes that employer contributions are in line with, and even slightly exceed, reasonable expectations while member contributions have been very strong, exceeding expectations. New projections of superannuation assets to 2020 are included.