Evolved from a pension award, the superannuation system in Australia has been carried out mandatorilysince1992, to facilitate the government to handle the pension payment issues withthe growing aged population faced with by most developed countries. The compulsory rate was first set at 3% and then gradually increasedto 9% fro
nt tax for aged above 60 and the abolishment of maximum benefit amount (RBL) (2007) etc., though the contribution has a limit and the access to super account is restricted to preservation age.
Besides, other issues focus on the degradation of pre-retirement life. The super savings requirement as well as the tax impose a great burden on residents, thus decreasing their living quality and flexibility of capital allocation due to their growing dependence on pension.
The amount needed at retirement includes annual basic living expenses, inflation factors, mortality rate and specific needs. Basic living cost is calculated by summing
Considering special needs of each person, the following factors need considering. First, expectation of his life, such as basic, moderate, comfortable or even luxury life style, could make difference to the amount needed. AFA (2013) updates frequently on moderate and comfortable life style weekly expenditure. Next, other factors could involve whether the home is owned or rented at the time of retirement, how much heritage they want to leave to their children, whether there are children born in around fifties to be financially supported and whether they live as a single or couples.
For example, a couple has two children aged 13 at their retirement. They want a comfortable life and like to leave $50,000 cash and the house to their children. They would still repay the house when they are retired. Suppose investment rate of 5% and inflation rate of 3%, the amount needed at their retirement is calculated as table 1. The total amount needed is $1,253,386 and annual receipt should be $84,696 for more than the basic life style receipts.