Australia's Superannuation System
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Presentation to Young Professionals CPA Discussion Group on Australia's Superannuation System
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Australia's Superannuation System
- 1. 1 © 2014 Deloitte Touche Tohmatsu Young Professionals CPA Discussion Group 8 October 2014 Stephen Huppert Partner, Deloitte
- 2. 2 © 2014 Deloitte Touche Tohmatsu Superannuation = saving for retirement The Australian retirement income system comprises three elements, which have become known as the three pillars: Superannuation is tax advantaged savings but to receive that tax advantage, contributions must be paid into a complying superannuation entity. Pillar 1 Age pension Pillar 2 Compulsory superannuation contributions. Pillar 3 Voluntary superannuation contributions and other savings
- 3. 3 © 2014 Deloitte Touche Tohmatsu Total superannuation assets now over $1.7 trillion… 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 2033 $ billions APRA market statistics to 30 June 2012 APRA market statistics to 30 June 2012
- 4. 4 © 2014 Deloitte Touche Tohmatsu …and projected to pass $7 trillion within 20 years 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 2033 $ billions APRA market statistics to 30 June 2012 Deloitte projections from 1 July 2012 ~1.0 x GDP ~1.8 x GDP
- 5. 5 © 2014 Deloitte Touche Tohmatsu Projected assets 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 $ billion
- 6. 6 © 2014 Deloitte Touche Tohmatsu Projected assets pre & post retirement 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 $ billion Post-retirement Pre-retirement
- 7. 7 © 2014 Deloitte Touche Tohmatsu Assets by segment as a percentage of total Not for profit: 39% Retail: 28% SMSF: 33% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Jun-97 Jun-99 Jun-01 Jun-03 Jun-05 Jun-07 Jun-09 Jun-11 Corporate Industry Public sector Retail SMSF
- 8. 8 © 2014 Deloitte Touche Tohmatsu Growth of SMSFs 0.0 100.0 200.0 300.0 400.0 500.0 600.0 0 100,000 200,000 300,000 400,000 500,000 600,000 1997 1999 2001 2003 2005 2007 2009 2011 2013 Total assets ($bn) Number of funds Number of funds (LH axis) Total assets (RH axis) Date Number of funds Total assets ($bn) Jun 2006 309,088 203.2 Jun 2007 350,142 312.2 Jun 2008 375,738 321.4 Jun 2009 399,742 326.2 Jun 2010 414,956 366.2 Jun 2011 442,987 423.2 Jun 2012 478,263 439.0 Jun 2013 512,375 508.0
- 9. 9 © 2014 Deloitte Touche Tohmatsu Industry fund segment (30 June 2013) Source: APRA 0 10 20 30 40 50 60 70 1 5 9 13 17 21 25 29 33 37 41 45 49 Fund assets ($bn) 75% 3% 22% Top 10 The Rest
- 10. 10 © 2014 Deloitte Touche Tohmatsu Life expectancy and pension age 40 45 50 55 60 65 70 75 80 85 90 1881-1890 1946-1948 1975-1977 1994-1996 1999-2001 2004-2006 2010-2012 Pension Age Life Expectancy at Birth Life Expectancy at 65 Males, ABS Life Tables
- 11. 11 © 2014 Deloitte Touche Tohmatsu © 2013 Deloitte Touche Tohmatsu
- 12. 12 © 2014 Deloitte Touche Tohmatsu Future life expectancy and pension age 60 65 70 75 80 85 90 95 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 Life expectancy at 65 Current Pension Age NCOA Proposed Pension Age Govt Proposed Pension Age Govt Proposed Pension Age2 ?
- 13. 13 © 2014 Deloitte Touche Tohmatsu 13 Compliance Considerations © 2013 Deloitte Touche Tohmatsu Ownership of the assets 2013 2023 2033
- 14. 14 © 2014 Deloitte Touche Tohmatsu 14 Compliance Considerations © 2013 Deloitte Touche Tohmatsu Trade offs in providing for old age
- 15. 15 © 2014 Deloitte Touche Tohmatsu We must do better for retiring Australians Males Females Modest lifestyle $340,000 $370,000 Comfortable lifestyle $610,000 $680,000 Amounts needed at age 65 (2014 dollars) Males Females Age: 60 – 65 $114,000 $94,000 Age: 65+ $151,000 $133,000 Average account balances (June 2013 APRA data)
- 16. 16 © 2014 Deloitte Touche Tohmatsu © 2013 Deloitte Touche Tohmatsu
- 17. 17 © 2014 Deloitte Touche Tohmatsu Pillars of a retirement income system Pillar 1 Age pension Pillar 2 Compulsory superannuation contributions. Pillar 3 Voluntary superannuation contributions and other savings Pillar 4 Extend work life, enable more part-time work, equity release
- 18. 18 © 2014 Deloitte Touche Tohmatsu © 2013 Deloitte Touche Tohmatsu Retirement Adequacy Delay Retirement Education & Advice Products & Investments Increase Contributions
- 19. 19 © 2014 Deloitte Touche Tohmatsu The strategic objective of a superannuation fund is… Maximise Members’ Retirement Outcomes Net Investment Returns Operating Costs Products & Services Member Behaviour
- 20. 20 © 2014 Deloitte Touche Tohmatsu The strategic objective of a superannuation fund is… Maximise Members’ Retirement Outcomes Net Investment Returns Operating Costs Products & Services Member Behaviour
- 21. 21 © 2014 Deloitte Touche Tohmatsu Contact Stephen Huppert Partner Deloitte sthuppert@deloitte.com.au @stephenhuppert http://www.deloitte.com/au/superadequacy
- 22. 22 © 2014 Deloitte Touche Tohmatsu © 2013 Deloitte Touche Tohmatsu About Deloitte Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in 140 countries, Deloitte brings world class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte's 150,000 professionals are committed to becoming the standard of excellence. Deloitte's professionals are unified by a collaborative culture that fosters integrity, outstanding value to markets and clients, commitment to each other, and strength from diversity. They enjoy an environment of continuous learning, challenging experiences, and enriching career opportunities. Deloitte's professionals are dedicated to strengthening corporate responsibility, building public trust, and making a positive impact in their communities. Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its member firms. About Deloitte Australia In Australia, Deloitte has 12 offices and over 4,500 people and provides audit, tax, consulting, and financial advisory services to public and private clients across the country. Known as an employer of choice for innovative human resources programs, we are committed to helping our clients and our people excel. Deloitte's professionals are dedicated to strengthening corporate responsibility, building public trust, and making a positive impact in their communities. For more information, please visit Deloitte’s web site at www.deloitte.com.au. Confidential This document and the information contained in it is confidential and should not be used or disclosed in any way without our prior consent. Liability limited by a scheme approved under Professional Standards Legislation. General information only This presentation is provided as general information only and does not consider your specific objectives, situation or needs. You should not rely on the information in this presentation or disclose it or refer to it in any document. We accept no duty of care or liability to you or anyone else regarding this presentation and we are not responsible to you or anyone else for any loss suffered in connection with the use of this presentation or any of its content. © Deloitte Touche Tohmatsu, 2013. All rights reserved.