FACING PLANNING FOR RETIREMENT TODAY, ‘GOVERNANCE & REFORMS: THE WAY TO GO

1. FACING PLANNING FOR RETIREMENT TODAY, ‘GOVERNANCE & REFORMS: THE WAY TO GO Durban, South Africa – 18-20 August 2013 Dr Jack Jacoby

2. Trends People are living longer People are working longer

3. PARTICIPATION RATES OF 50-64 YEAR-OLDS IN 1970 AND 2008 19 August 2013 Dr Jack Jacoby – IRF Conference 2013 Source: D’Addio et al. (2010) based on OECD Employment Database. 1 2 http://dx.doi.org/10.1787/888932370303

4. 19 August 2013 EMPLOYMENT TO POPULATION RATIO, PEOPLE AGED 55-64 YEARS Dr Jack Jacoby – IRF Conference 2013 Source: OECD Factbook 2010 <www.oecd.org>

5. 19 August 2013 LABOUR FORCE PARTICIPATION OF PEOPLE AGED 55 YEARS AND OVER - 1980-2010 AUSTRALIA Dr Jack Jacoby – IRF Conference 2013 Year to June.Source: ABS 1980-2010 Labour Force Survey

6. Trends People are living longer Older People are working longer Inflation and the cost of living longer is increasing – medical, housing, services

7. 19 August 2013 ASFA RETIREMENT STANDARD (WEEKLY) Dr Jack Jacoby – IRF Conference 2013 Budgets for various households and living standards (March Quarter 2013) The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. Single calculations are based on female figures. All calculations are weekly, unless otherwise stated.

8. 19 August 2013 ASFA RETIREMENT STANDARD (WEEKLY) Dr Jack Jacoby – IRF Conference 2013 Budgets for various households and living standards (March Quarter 2013) The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. Single calculations are based on female figures. All calculations are weekly, unless otherwise stated.

9. Trends People are living longer Older People are working longer Inflation and the cost of living longer is increasing – medical, housing, services People are saving less

10. 19 August 2013 MEAN SUPERANNUATION BALANCES (2009-2010) AUSTRALIA Dr Jack Jacoby – IRF Conference 2013

11. 19 August 2013 HOLIDAY VERSUS RETIREMENT Dr Jack Jacoby – IRF Conference 2013 Source: HSBC

12. Trends People are living longer Older People are working longer Inflation and the cost of living longer is increasing – medical, housing, services People are saving less Money saved during one’s working life needs to fund a longer retirement

13. Trends People are living longer Older People are working longer Inflation and the cost of living longer is increasing – medical, housing, services People are saving less Money saved during one’s working life needs to fund a longer retirement During economic downturns, earnings from liquid investments fall

14. 19 August 2013 REQUIRED SAVINGS FOR RETIREMENT Dr Jack Jacoby – IRF Conference 2013 Source: U.S. Census Bureau, Saperston Companies, Bankrate. Date Verified: 5.8.2013

15. 19 August 2013 DEPOSIT INTEREST RATE 1991-2010 Dr Jack Jacoby – IRF Conference 2013 Deposit interest rate (%) in Australia The Deposit interest rate (%) in Australia was last reported at 4.21 in 2010, according to a World Bank report published in 2012. Deposit interest rate is the rate paid by commercial or similar banks for demand, time, or savings deposits.

16. Trends People are living longer Older People are working longer Inflation and the cost of living longer is increasing – medical, housing, services People are saving less Money saved during one’s working life needs to fund a longer retirement During economic downturns, earnings from liquid investments fall People are having fewer children

17. 19 August 2013 TOTAL FERTILITY RATE, 1960-2011 (LIVE BIRTHS PER WOMAN) Dr Jack Jacoby – IRF Conference 2013

18. Trends People are living longer Older People are working longer Inflation and the cost of living longer is increasing – medical, housing, services People are saving less Money saved during one’s working life needs to fund a longer retirement During economic downturns, earnings from liquid investments fall People are having fewer children In a globalised world, economic downturns are broader, deeper and longer

19. Great Depression (1929 to late 1930s), stock market crash, banking collapse in the United States sparks a global downturn, including a second but not heavy downturn in the U.S., the Recession of 1937. Durations: 43 and 13 months respectively. • Recession of (1945) Duration: 8 months • Recession of (1948 - 1949) Duration: 11 months • Post-Korean War Recession (1953 - 1954) - The Recession of 1953 was a demand-driven recession due to poor government policies and high interest rates. Duration: 10 months • Recession of (1957 - 1958) Duration: 8 months • Recession of (1960 - 1961) Duration: 10 months • Bond Inversion of (1965 - 1967) no recession materialized • Recession of (1969 - 1970) Duration: 11 months • 1973 oil crisis (1973 - 1975) - a quadrupling of oil prices by OPEC coupled with high government spending due to the Vietnam War leads to stagflation in the United States. Duration: 16 months • 1979 energy crisis - 1979 until 1980, the Iranian Revolution sharply increases the price of oil • Recession of (1981 - 1982) Duration: 16 months • Early 1980s recession - 1982 and 1983, caused by tight monetary policy in the U.S. to control inflation and sharp correction to overproduction of the previous decade which had been masked by inflation • Great Commodities Depression - 1980 to 2000, general recession in commodity prices • Late 1980s recession - 1988 to 1992, collapse of junk bonds and a sharp stock crash in the United States leads to a recession in much of the West • Japanese recession - 1991 to present, collapse of a real estate bubble and more fundamental problems halts Japan's once astronomical growth • Asian financial crisis - 1997, a collapse of the Thai currency inflicts damage on many of the economies of Asia • Early 2000s recession - 2001 to 2003: the collapse of the Dot Com Bubble, September 11th attacks and accounting scandals contribute to a relatively mild contraction in the North American economy. 19 August 2013 A HISTORY OF MODERN CRISES Dr Jack Jacoby – IRF Conference 2013

20. Trends People are living longer Older People are working longer Inflation and the cost of living longer is increasing – medical, housing, services People are saving less Money saved during one’s working life needs to fund a longer retirement During economic downturns, earnings from liquid investments fall People are having fewer children In a globalised world, economic downturns are broader, deeper and longer The under-employment of our youth

21. 19 August 2013 YOUTH UNEMPLOYMENT RATES Dr Jack Jacoby – IRF Conference 2013 Source: OECD

22. Trends People are living longer Older People are working longer Inflation and the cost of living longer is increasing – medical, housing, services People are saving less Money saved during one’s working life needs to fund a longer retirement During economic downturns, earnings from liquid investments fall People are having fewer children In a globalised world, economic downturns are broader, deeper and longer The under-employment of our youth The falling relative proportion of tax generating workers

23. 19 August 2013 TAX BURDEN Dr Jack Jacoby – IRF Conference 2013

24. Trends People are living longer Older People are working longer Inflation and the cost of living longer is increasing – medical, housing, services People are saving less Money saved during one’s working life needs to fund a longer retirement During economic downturns, earnings from liquid investments fall People are having fewer children In a globalised world, economic downturns are broader, deeper and longer The under-employment of our youth The falling relative proportion of tax generating workers

25. Late 1800 A limited number of private companies provide a form of superannuation for select employees. • Post 1945 Superannuation became more recognised but access limited to executive and public sector employees. • 1960s and 70s Government inquiries find s factors are hindering the ability of Australians to save for retirement. • 1983 Tax changes are introduced to encourage people to hold benefits in the super system until retirement. • 1985 The ACTU seeks a 3% employer superannuation contribution to be paid into an industry fund. • 1986 The Commission approves the ACTU's proposal. Superannuation coverage stands at around 40% of employees. • 1989 In the four years following the 1986 National Wage Case, super coverage increases rapidly to 79% of employees. • 1991 Private sector super coverage reaches 68%, up from 32% in 1987. • 1992 Superannuation Guarantee (SG) introduced. Employers required to make tax-deductible superannuation contributions on behalf of their employees. • 1995 Super coverage for women hits 85%, from 25% in 1983. Super fund assets grow from $40 billion to over $180 billion. • 1997 Legislation to give employees a choice of super fund is introduced. Over 90% of the workforce is covered by super. • 1999 A Lost Members Register, maintained by the Australian Taxation Office (ATO) is established. • 2002/03 Superannuation employer contributions reach 9% of salary, after being phased in over a 10-year period. • 2005 Legislation to give employees a choice of super fund comes into effect on 1 July. • 2006/07 Sweeping changes are introduced to super including: abolition of tax on lump sums and pension payments made to members over age 60, abolition of Reasonable Benefit Limits, new minimum standard rules for pensions and annuities, removal of compulsory cashing of superannuation benefits for those over age 65, introduction of penalty tax caps on the amount which may be contributed to super, extension of co-contribution scheme to the self-employed, and simplification of tax calculations through the introduction of streamlined components. • 2009 Concessional contributions are limited to $25,000 per person per year, from 1 July. • 2012/13 Super contribution rebate for low income workers earning less than $37,000 a year commences 1/7/12. • 2013/14 SG contribution rate rises to 9.25%, rising incrementally to 12% by 1 July 2019. Employers to make SG contributions for employees beyond age 70 if they are still employed from 1 July 2013 and onwards. AUSTRALIA’S SUPERANNUATION TIMELINES

26. Trends People are living longer Older People are working longer Inflation and the cost of living longer is increasing – medical, housing, services People are saving less Money saved during one’s working life needs to fund a longer retirement During economic downturns, earnings from liquid investments fall People are having fewer children In a globalised world, economic downturns are broader, deeper and longer The under-employment of our youth The falling relative proportion of tax generating workers Late entry into superannuation by the Baby Boomer generation Technology and the virtual workplace

27. Trends People are living longer Older People are working longer Inflation and the cost of living longer is increasing – medical, housing, services People are saving less Money saved during one’s working life needs to fund a longer retirement During economic downturns, earnings from liquid investments fall People are having fewer children In a globalised world, economic downturns are broader, deeper and longer The under-employment of our youth The falling relative proportion of tax generating workers Late entry into superannuation by the Baby Boomer generation Technology and the virtual workplace Changing work emphasis from attendance to performance

28. Trends People are living longer Older People are working longer Inflation and the cost of living longer is increasing – medical, housing, services People are saving less Money saved during one’s working life needs to fund a longer retirement During economic downturns, earnings from liquid investments fall People are having fewer children In a globalised world, economic downturns are broader, deeper and longer The under-employment of our youth The falling relative proportion of tax generating workers Late entry into superannuation by the Baby Boomer generation Technology and the virtual workplace Changing work emphasis from attendance to performance Lifetime career changes

29. 19 August 2013 STRATEGIES • Strategy 1: Employment of mature workers • Strategy 2: During employment, help all workers build additional interests and revenue sources • Strategy 3: Establish mature networks • Strategy 4: Mentoring • Strategy 5: Education and literacy standards • Strategy 6: Education of women • Strategy 7: Get youth employed as soon as possible • Strategy 8: Stop using the term ‘retirement’ Dr Jack Jacoby – IRF Conference 2013