The flaws in the superannuation arguments being promoted by the Grattan Institute and others have been rammed home by a new Mercer Report released today.
The report, authored by Mercer’s David Knox, declares that the Grattan findings are flawed because it has used a series of assumptions that is not realistic for the average Australia.
Pointing to the dangers posed by the Government’s announcement of a review of Australia’s retirement income system, Knox backed his analysis by claiming that the Grattan assumptions simply did not stack up to closer scrutiny.
He said, on that basis, it was “vital to counter misleading conclusions to ensure all discussion and debate is grounded in reality and typical behaviour”.
Knox’s report for Mercer found that the Grattan Institute’s assumptions were based on a number of flawed assumptions including:
- Workers are single when they retire, whereas 70 per cent have a partner and will therefore receive a lower age pension than assumed by Grattan;
- Desired lifestyle is based on the income received in the five years prior to retirement, despite the fact many Australians transition to retirement by reducing income in the last few years;
- Everyone will work until the future pension eligibility age of 67, when in fact most Australians retire a few years before the pension age;
- No allowance being made for half of the population living beyond the age of 92, the projected average life expectancy for a 70-year-old in 2055; and
- The median income worker having a net replacement rate of 89 per cent of their income before retirement, when Mercer research shows this will be much lower, at just 68 per cent.
Knox said Grattan’s sole focus on retirement income also failed to consider the need for flexibility to provide retirees with access to capital, an important feature of retirement products.
“Mercer’s research has shown that retirees want a stable income for their whole life, as well as access to capital to provide them with some protection from unexpected expenses that can easily occur during retirement,” he said.
Dr Knox warned policy makers to approach Grattan’s research with “considerable caution” given it was limited to “a single cameo” that had given rise to “misleading” conclusions.