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80% Indigenous workers won’t have a comfortable retirement

Dan Purves




Only 20 per cent of Indigenous workers in full-time employment will accumulate enough savings to achieve the Association of Superannuation Funds of Australia’s (ASFA’s) comfortable standard of living in retirement, an academic report has revealed.

Meanwhile, 33 per cent of non-Indigenous workers are predicted to achieve a comfortable standard of living, defined by ASFA as having income of $42,569 per annum in retirement.

“A key concern raised by the research is that only one in five Indigenous Australians, compared with one in three non-Indigenous Australians, will be able to accumulate enough superannuation assets to allow them to maintain a satisfactory standard of living in their retirement,” said Robert Bianchi, associate professor Griffith University, who conducted the research with adjunct professor Michael Drew, Dr Adam Walk and Dr Osei Wiafe, as part of the CSIRO-Monash Superannuation Research Cluster Program.

The study found that, on average, Indigenous workers will retire with 27 per cent less in superannuation savings – or, put another way, $165,000 less over a 40 year working life to 65 years of age – than non-Indigenous workers.

Amanda Young, chief executive of the First Nations Foundation, said the figures were alarming, but praised the research as a highly important contribution, adding more work like this should be done “as the picture was too pixelated”.

“These figures are speculative because there is hardly any data in the superannuation space, meaning they had to do this on modelling. A whole [different] picture could emerge if the superannuation sector lifted its game to identify their Indigenous members.”

She added that part of the research showed Indigenous peoples would either have to contribute 14.3 per cent into super to retire at 65 – an unlikely prospect, as according to the Australian Bureau of Statistics the median Indigenous weekly income is around 23 per cent lower than the comparable non-Indigenous income – or work until they were 71 to achieve the same outcomes.

“That is exactly the Indigenous median age for life expectancy. That means you work until you die and you never access your superannuation,” she said.

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    The study assumed that participants contributed 9.5 per cent of their pre-tax income into their superannuation fund over a 40-year investment horizon until retirement at age 65, and that current median income levels and historical asset returns continue over this investment period. Asset allocation was based on a typical default fund.

    “Our research indicates that while the mean superannuation balance for non-Indigenous Australians at retirement is 15 per cent lower than what is required for a comfortable retirement, the mean balance for Indigenous Australians is 46 per cent lower than this critical level,” Bianchi said.

    “This means that a significant proportion of Indigenous full-time workers will still need some form of government assistance to provide even a modest retirement income.”


    Retirement wealth gap

    The modelling results reveal a significant retirement wealth gap of 27 per cent for Indigenous males when compared with the median non-Indigenous male worker (as shown in the following table). Indigenous females were even worse off, with a gap of 39 per cent.

    Indigenous comfortable retirement

    Bianchi said: “Closing the income and life expectancy gaps between Indigenous and non-Indigenous Australians will significantly improve the retirement outcomes for Indigenous Australians.

    “Policies that can improve the education, employment and income outcomes of Indigenous Australians will translate directly into higher levels of superannuation savings for these individuals.

    “Policies designed to increase the life expectancy of Indigenous Australians will also extend the non-working phase for these individuals who are more likely to experience a shortened retirement.”

    Pauline Vamos, chief executive of ASFA, said these policy ideas need to be explored, adding the superannuation system needed to be flexible in design.

    “The Indigenous community is not homogeneous, and the non-Indigenous community is not homogeneous.

    “Let’s look at different ways people contribute. We might find with certain Indigenous groups and communities it should be a different access age, different death benefit age, but you need to look at these things.”

    The paper is one of 11 working papers (focusing on superannuation and the economy, and the needs of Australians over 60) to be released in 2016 by the multidisciplinary international research team that forms the CSIRO-Monash Superannuation Research Cluster.