Literacy no aid to retirement planning

The age old hand wringing over the quality of financial literacy in Australia received another airing in a Productivity Commission study, "Superannuation Policy for Post-Retirement", released yesterday.

"The lack of financial literacy continues to hinder how effectively retirees build and make use of their retirement savings," the Productivity Commission intoned in its report.

There has been a proliferation of measures aimed at improving financial literacy, it noted. "But there has been little evaluation of whether such approaches work in isolation or in concert, and a lack of financial literacy continues to hinder how effectively retirees build and make use of their retirement savings."

The chief thrust of the report is a claim that Federal Government could save up to A$7 billion a year if workers were prevented from accessing their superannuation until they reached 65.

The Commission found Australians would delay their retirement by about two years and increase their superannuation balances by up to ten per cent if the preservation age (the age at which people can access their super) was lifted from 55 to 65.

That would save the Budget around $7 billion a year by 2055, mainly because of a reduction in age pension payments and an increase in tax receipts from wealthier households.

Results from modelling undertaken by the Commission suggest that increasing the preservation age could induce modest increases in mature age workforce participation and in the superannuation balances of Australians at retirement, and provide fiscal gains to government.