Super to hit $7.6 trillion in 20 years

But most Australians probably still won't have enough for their retirement

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

In a report released today, Deloitte has estimated that Australia's total superannuation assets will hit $7.6 trillion in 20 years.

Since the global financial crisis in 2008, Australia's super pool has risen from $1.1 trillion to $1.6 trillion at 30 June 2013, and is the fourth-largest in the world. But the system designed to provide Australians with adequate income during retirement has yet to meet its goal. An estimated 81% of Australians are forced to rely, at least partially, on the government aged pension to supplement their income.

The large percentage is partly driven by the fact the superannuation system is still fairly young, so many people have had few years to contribute to their retirement savings.

But forces are at work that could still see $7.6 trillion in assets not being able to deliver the income required by retirees. The number of Australians over the age of 65 will increase by a whopping 75% over the next twenty years, with proportionally less Australians able to fund those in retirement. We are also living longer, and therefore need a large amount to provide for our retirement.

That leaves the government with some prickly decisions. Increasing contributions and forcing people to retire at a later age are two suggestions, and the government has already acted on both by raising the pension age to 67, and increasing the superannuation guarantee from 9% to 12%.

But will that be enough?

Deloitte suggests not. An average 30-year old with a salary of $60,000 is projected to have $1.1 million on reaching age 65 in 2048. To afford a comfortable retirement for the remainder of their life expectancy would require $1.58 million for a male and a whopping $1.76 million for a female, who is expected to live an extra three years. That would require an additional contribution of between 5.4% and 7.5% – on top of the increase in the superannuation guarantee.

The likely winners of the increase in super assets will be the banks such as Westpac Banking Corporation (ASX: WBC), Commonwealth Bank (ASX: CBA) and National Australia Bank (ASX: NAB) along with insurers such as AMP Limited (ASX: AMP), who have plenty of experience in fighting for individual customers, and dominate the retail sector of the superannuation system through their wealth management arms.

Foolish takeaway

Of course the institutional funds have yet to figure out how to compete with the attraction of self-managed super funds. That could see a massive upheaval of our super system over the next 20 years, as the retail and industry funds attempt to attract more customers.

Interested in our #1 dividend-paying stock? Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

More reading

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »