Sometimes saving for retirement may seem a little like feeling your way in the dark.
You probably know your existing super fund balance but may have no immediate impression of the likely balance by the time of retirement - if you continue your current contribution pattern.
ASIC's push this week for super funds to regularly provide members - no matter their ages - with a "snapshot" projection of their likely super savings upon retirement makes much sense.
This snapshot would no doubt provide many people with a dose of reality about the true state of their super savings and encourage them to become really involved with saving for retirement.
ASIC has published a valuable discussion paper, looking at the various issues involved including how the projection of super savings could be provided either through a paper statement to members or with a somewhat standardised online calculator.
Interestingly, ASIC clearly distinguishes between an end-benefit projection of super, as proposed, from the sophisticated calculators currently offered by many funds.
ASIC explains that fund members generally have to seek out the existing online calculators and then "make an active decision to use them". And some of these calculators are quite complicated and require varying degrees of financial literacy. "[Existing] calculators may enhance the understanding generated by an end-benefit projection," says ASIC.
Read ASIC's discussion paper.
ASIC is not proposing that the provision of end-benefit projections be mandatory for super funds, and its discussion paper looks at whether some relief from the Corporations Act would be needed for funds to provide the projections.
Jeremy Cooper, deputy chairman of ASIC, points out that 46% of fund members do not make additional contributions to the compulsory contributions by their employers. And as many as a third of members are not on target to finance an "adequate" standard of living in retirement.
"Many people don't know how much they will retire with and what kind of lifestyle they will be able to afford," says Cooper.
"It might shock some people, but we want them to see a super snapshot of their projected end-benefit in time for them to do something about it."
Retirement savings funds in such countries as the United Kingdom and Sweden provide members with projections of their end-benefits. And it is time that Australia - the world leader in superannuation - took a similar approach.
