POWERED BY MOMENTUM MEDIA
$1.6m cap unlikely to drag retiree living standard
The Federal Budget's $1.6 million lifetime superannuation cap proposal is unlikely to drag down the standard of living for most retirees, Milliman believes.
According to a Milliman analysis, there is almost a 94 per cent probability that $1.6 million would be enough to sustain a $50,000 annual income for a 65-year-old male retiree until a life expectancy of 87.
Milliman said the probability declines slightly for a 65-year-old female retiree because her predicted life span is slightly longer at 89.
The analysis noted that a longer lifespan lowered the probability that a $50,000 annual income would last until age 95 to an 80 per cent probability, although the Association of Superannuation Funds of Australia (ASFA) estimated that older retirees needed about 10 per cent less than younger retirees to fund a comfortable standard of living.
"This is still a positive result. In fact, a $70,000 annual income is still likely to be sustainable (i.e., better than a 50:50 chance of lasting to age 95)," Milliman said.
"While these calculations show that the new cap is unlikely to drag down the standard of living for most retirees."
Milliman said investors could pull a range of levers (beyond expenditure) to change the probabilities and improve their retirement lifestyle.
"These include more sophisticated investment strategies such as specific management of sequencing risk and longevity protection," the analysis said.
While retirees will need to assess their positions after the raft of changes announced in the federal budget, the $1.6 million cap is unlikely to derail their retirement plans alone."
Recommended for you
Jim Chalmers has defended changes to the Future Fund’s mandate, referring to himself as a “big supporter” of the sovereign wealth fund, amid fierce opposition from the Coalition, which has pledged to reverse any changes if it wins next year’s election.
In a new review of the country’s largest fund, a research house says it’s well placed to deliver attractive returns despite challenges.
Chant West analysis suggests super could be well placed to deliver a double-digit result by the end of the calendar year.
Specific valuation decisions made by the $88 billion fund at the beginning of the pandemic were “not adequate for the deteriorating market conditions”, according to the prudential regulator.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.56 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
31.06 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.81 3 y p.a(%)
