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Expatriate Financial Planning Issues

Superannuation - Some "Demographic" Background

Probably never in the history of Australia has the issue of superannuation, or more broadly, retirement income, had such a high profile in the media or politics. Apart from the normal political attraction of any system that now holds assets of $2Trillion there is a genuine desire to somehow fashion an efficient and fair system of financing an increasingly ageing community supported by a smaller and smaller working base. In that regard it is hard to avoid the inevitable consequences of demographic changes - and they have been considerable, even over the past 50 years.

To give you some idea of just how dramatic those changes have been, consider some of the charts below which illustrate the increase in our longevity. For most of last century providing an aged pension for men and women aged 60 and 65 respectively represented a minimal burden for Government - it was both a relatively modest payment and, on average, unlikely to be paid for very long, if at all.

Today, with men and women born both likely to live into their 80's the cost impact is much higher and partly explains recent increases in both the minimum pension age and why the aged pension is likely to be increasingly positioned as a "safety net" rather than an entitlement, unless there is a radical move to a "universal income" - with the emphasis on individuals making their own provisions through superannuation and other investments.

The impact of greater longevity and decreasing birth rates has meant that Australia's age profile has changed significantly even over the space of 50 years - despite continuing high levels of migration. In the chart below you will see, for example, that the proportion of the population aged over 85 has more than tripled since 1970 and this trend is continuing.

Life expectancy actually changes over the course of a person’s life as they survive childhood and adolescence and their chances of reaching an older age increases. Life expectancy at different ages can be presented as the number of "additional years" a person can expect to live at a certain age. Charting the figures provided by the ABS in the 2016-2018 Life Expectancy Tables shows that a male and female retiring at 60 can now expect to live a further 24.00 and 26.98 years respectively.

Hence - disregarding access to any social security pension and part time work - you will need to have saved enough during a working life of perhaps 40 years to see you through another 24 to 27 years. And that's if you are "average" - note the comment below by the Actuaries Institute in November, 2019:

“A healthy, well-educated female entering retirement today, who had an affluent career and enjoys a good quality of housing, is just as likely to live beyond age 100 as she is to die before age 80”.


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