Super problem for Millennials

Concerns about the underfunded retirement of Australia’s next big generation are being put in the too-hard basket, but experts warn the problem will only get harder to fix with time.

Live longer, work longer: At the rate many young people are saving, their retirement prospects will appear when they’ve inherited their parents’ assets.

Live longer, work longer: At the rate many young people are saving, their retirement prospects will appear when they’ve inherited their parents’ assets.

The architect of Australia’s superannuation scheme, former-prime minister Paul Keating, told Four Corners on Monday the workforce had changed since the system was set in place almost 30 years ago, and expectations must change with it. 

But with those workforce changes seeing young Australians delay superannuation contributions, and with home ownership rates falling among Australians, Millennials will have fewer options when they want to retire, according to the Grattan Institute.

While Australia’s superannuation pool sits at $2.5 trillion and growing, the rise of the gig economy and regular job swapping have become problematic for a superannuation system designed for full-time workers.

“The people least likely to be benefitting from super are the people least likely to be buying their own home.”

Callam Pickering, chief Asia-Pacific economist at Indeed, said young people in Australia had increasingly been locked out of full-time work since the GFC – a fact now impacting on super contributions.

“Gig workers” like Uber drivers, food deliverers and many freelancers operate as independent contractors, so the companies they represent often do not make superannuation contributions, which are supposed to represent 9.5 per cent of our wage.

“The reality for young people is they’re going to find it difficult to retire when they get to 65,”  Mr Pickering said. John Daley, chief executive of the Grattan Institute, agrees the problem is only going to get worse, but said it was not going to be solved by pouring money into the system. “The people least likely to be benefiting from super are the people least likely to be buying their own home,” Mr Daley told Domain. He said the reason that’s a problem is that 30-40 years ago these very same Australians were able to afford a home – a key asset in retirement.

A recent Grattan study showed ownership rates among 25-34-year-olds has fallen from 60 to 45 per cent since 1981, pointing the finger at rising house prices. But Mr Daley said the issue of home ownership would grow to be even more an issue as migration pushed up the numbers of middle-aged Australians, some of whom would enter retirement not owning their own home. Meanwhile, The Demographics Group director of research, Simon Kuestenmacher, said Australia’s longer-living population was going to force us to rethink retirement, whether we want to or not, or else risk running out of money.