An Analysis of Household Retirement Adequacy In Australia

Australia has a three-pillar based retirement system consisting of the Superannuation Guarantee Levy (SGL), Private Savings and the Age Pension. The purpose of this paper is to assess the impact on the retirement standard of living of Australian households by considering all of the components of the retirement system as well as allowing for the volatility of the economic variables that affect the pre-retirement and post-retirement phases. The analysis is based on the household unit and therefore covers Australians as a whole, and not only those in employment and receiving SGL contributions. The results indicate that the integrated retirement system can be expected on the assumptions made to provide an acceptable standard of living in retirement until quite advanced ages. The results also show that the overall system is not well integrated, and even when the SGL system is mature, the typical Australian household will still access at least a partial Age Pension, and most likely the full Age Pension in retirement.