But Mercer senior actuary David Knox said a string of questionable assumptions that underpinned Grattan’s analysis meant many retirees would be short-changed once they left the workforce.
He said even with the full 12 per cent guarantee, the average full-time worker would finish with a super payout worth 58 per cent of their pre-retirement income. This is well short of the 70 per cent level that Grattan’s work assumed.
Dr Knox said the sharply-falling rate of people who retire without a mortgage was a major risk that suggested retirees needed more cash in their super.
“Whilst the median income earner may be able to maintain their previous standard of living, the average full-time earner will need to save additional funds over and above compulsory superannuation if they wish to have a reasonable likelihood of maintaining their previous standard of living throughout retirement,” he found.
“We should recognise that the next generation will face the effects of the changing workforce, reduced home ownership and financial implications associated with an ageing population.
“We cannot assume that the future will reflect our past experience. It is much more complex than that.”
Dr Knox said Grattan assumptions around when workers retired, how many people live beyond 92, unexpected risks and the standard of living enjoyed by Australians just ahead of their retirement were all at odds with the reality of most people.
But the Grattan Institute’s household finances program director Brendan Coates said Mercer was focused on boosting retirement at the expense of living standards for working Australians.
He said Mercer was ignoring consistent findings that a lift in the super guarantee to 12 per cent would only deliver a minor lift in post-retirement income for most Australians.
“Retirement incomes policy needs to acknowledge the trade-offs between higher living standards when retired against lower living standards when working. And modelling should reflect the reality of what Australians spending needs are. Unfortunately Mercer’s work does neither,” he said.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.