A report in The Australian Financial Review (AFR) has noted comments by Perpetual Limited (ASX: PPT) CEO, Geoff Lloyd, who said that he thought raising the compulsory superannuation contribution from 9% to 12% was not enough, and that 15% should be targeted.
His comments can be viewed from a few different angles. For the sceptically minded, it is the major players of the superannuation industry such as Perpetual, AMP Limited (ASX: AMP) and National Australia Bank Ltd. (ASX: NAB) who have the most to gain by a rise in the compulsory contribution, so of course firms such as Perpetual would call for such a move.
However with living expenses on the rise and the Australian population living longer and wanting to retire earlier, it is indeed an important consideration of just how to fund retirement and the only logical way would appear to be for retirees to save more during their working years.
Given the move to 12% isn't expected to arrive until 2021 and a 15% target is merely speculation, investors really need to act independently of the regulators and consider upping their voluntary savings. With most studies showing a significant and growing retirement savings gap it will be the pro-active savers who spend less during their working years and funnel more of their salary into long-term investments such as superannuation that will be best positioned to enjoy a comfortable retirement. As they will be able to start drawing down income from both superannuation and private investments.
Foolish takeaway
While superannuation regulations force workers to build a base-case safety net, most retirees will require much more than the 9% compulsory minimum contribution will provide. With stock markets having proven over history to be a good vehicle for generating long-term capital gains and income, workers could do worse than reducing their discretionary income in their younger years and using the stock market to grow their savings for a more comfortable retirement.
