Older workers tipping less into super despite working longer

Older workers are staying longer in the work force but appear to be less engaged with their superannuation, with concessional contributions dropping among pre-retirees and older workers.

While these shifts are not positive, stronger market conditions, salary growth and longer working lives have led to higher superannuation balances at retirement and higher projected final salaries for workers, according to the AMP Retirement Adequacy Index.

The ongoing changes in superannuation contribution caps has resulted in a fall in voluntary contribution rates, especially among older workers, with voluntary contributions falling from 7.8 per cent to 6.7 per cent for those aged between 55-59 years, while for those aged 60-64 voluntary contributions fell from 14.2 per cent to 11.7 per cent in 2012.

The fall is part of a wider trend in which overall contribution rates into superannuation fell by 0.2 per cent through 2012 to end the year at 12.1 per cent, the lowest level since 2007 according to the Index.

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Released today, the index considers projected net retirement income in the context of income in the years leading up to retirement, which increased slightly from 69.4 to 69.8 per cent in 2012.

The projected super balance at retirement for an average worker increased by seven per cent due to higher salaries and longer working lives, with the average worker able to expect to retire on about $52,000 per year, $3,000 higher than the level reported for 2011.

Part of this increase has come about due to more people working longer, with the number of people retiring after age 65 rising from 24 to 28 per cent over the year, but also making $5000 more in higher projected final salaries.

The report states that while the overall retirement adequacy of working Australians has increased slightly, the "key trends in this issue — super savings down for older workers, but projected pension payments up — are the opposite of longer-term hopes for the superannuation system".

AMP Financial Services managing director Craig Meller said index suggested declining levels of engagement with superannuation "which was worrying trend as higher numbers of people approach retirement".

"One way to encourage voluntary contributions and better engagement is to raise the concessional contributions caps. We welcome the progress made this week in Parliament on legislation increasing the caps for older workers and look forward to the increases becoming law in the coming weeks," Meller said.

"It's important for individuals to think about what sort of life they want for themselves in retirement and to factor that into their planning. It's been a challenging few years but it is important to remember that super remains the most tax effective long-term savings strategy," Meller said.