Just 5% own nearly half of Australia’s $3.5 trillion in superannuation assets. Why?

Australia has more than $3.5 trillion in superannuation assets. It’s a lot of money, but most of that belongs to just a few of us. Just 5% of taxpayers own more than 45% of all super, and one-third own 90%.

Is that bad? Or is it what you’d expect in a system where people accumulate assets slowly — that the young have little and the old have a lot?

I got my hands on Australian Tax Office data to answer questions like this. The ATO usually shares the information with researchers, but I asked and I received. It means I have 2% of all tax returns from 2020-21 right here on my computer. Anonymised, of course, with famous people removed, outliers blunted, data lightly “salted” via randomisation, etc. But still, there’s a 1 in 50 chance I have your numbers here on my machine.

It is fascinating in many ways. One angle I’ve been diving into recently is superannuation balances. I’m in my working prime and putting as much as I can into super, while worrying if it is enough.

The question of how much super is enough is important, and so is the question of how the system should be designed. Super is very tax beneficial. Do the tax breaks help us all equally? Or do the super system’s advantages accrue to just a few?

Let’s have a look at a simple question. Which age group has the most super?

The old have a lot more superannuation assets than the young. But are all grey nomads equal? How is super distributed?

We can zoom in on the 60- to 64-year-old age group and then break it into 20 groups, each containing 5% of taxpayers, from least super to most. This chart shows that the top group has far more than the median.

This looks pretty unequal. But it’s not the whole story. On average, men earn more than women and put away more super. So let’s break it down further.

The distribution is very unequal when filtered by male and female. Some people have used super to build up enormous war chests, while others have enough for maybe a small annual stipend and will certainly be relying on the pension. The median super balance for a man is $200,000; for a woman, $150,000.

In fact, superannuation amounts are more equal at younger ages. Here’s the equivalent chart for those aged 30-34, again broken into 20 groups of each gender, each containing 5% of taxpayers of that gender in this age group. What you see is a less steep distribution. Super is more even at this point in life (and balances are, on average, much lower — if you have $50,000 put away at this stage, you’re doing better than average).

If the 60-64 age bracket is more uneven than 30-35, well, 70+ is worse. At that age, about half of the people in this data have drained their super, while others are experiencing returns so much higher than their spending that their balance keeps rising relentlessly. If you have $4 million making 6% a year, you need to spend $240,000 a year just to stop your balance from rising.

At this point, we might as well show a chart with every age group. Note that the balances of the top end of the distribution for the elderly are so high they make every other group look puny by comparison.

But are there different levels of inequality at different age groups? It sure looks like it, but is it real or a trick of the eye? You can measure inequality with something called the “Gini coefficient”. A Gini of 0 is perfect equality and 1 is perfect inequality. Adjusting by this measure, our super system is closer to inequality than equality, and it gets worse the older you get. You can see the results in the next chart.

On this one I’ve set the axes to fit every chart, emphasising the shape of the distributions within each age group, rather than the differences between each.

You can see that by 70 and over, half of the taxpayers in the dataset have no super at all. Others have a bountiful balance that seems to keep going up. (The under-20s is an interesting outlier. It has me wondering if a select few parents are stuffing their kids’ super funds.) It looks like it’s a jungle out there, with some pensioners struggling to eat while others leave millions to their kids.

You sometimes hear people saying you need to save $1 million for retirement. The reality is that very few people manage that — perhaps 15% of men and 10% of women aged 65-69. But among them, many exceed that figure in grand fashion. Far more normal is to hit perhaps $250,000 in super at age 60-64, then start using it up.  

The charts show that the pension is going to be a big part of Australian life for a long time yet; super is economically important and a political darling, but defending the pension will still win a lot of votes.

Is Australia’s superannuation system broken, or working as intended? Let us know by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.