A simple change in the system that we rarely think of could save you between $60, 000 and $ four hundred thousand.
An important report released on Tuesday criticised the current pension system as outdated and hurt the savings efforts of young people, and the pension system itself could be scrapped.
Confused savers pay for accounts they didn't intend to hold and zombie insurance that went wrong.
One problem with the pension system is that our money is not always creating the retirement savings we deserve, according to a report released by the Productivity Commission. The committee recommended the creation of a panel of experts to recommend the best performing pension funds. "Australia's $2.6 trillion pension system has become a bad lottery for many Australians." Said Karen Chester, vice-chairman of the Productivity Council. "the system worked for a lot of people, but not everyone."
"We have a mandatory pension system for nearly 30 years, but its structure is out of date."
She says the system has two structural problems-unplanned multiple accounts and deep-rooted low returns.
One problem raised in the productivity commission's report is that many pension accounts are tied to employers, not employees. This means that many people open a new pension account every time they change jobs.
"1/3 accounts, about 10 million, are unplanned multiple accounts," Ms. Chester said.
"people pay 2.6 billion yuan each year for extra expenses and insurance premiums for these accounts." She said.
And the most likely victims are young people who often change jobs and low-income people.
Another issue raised by the Committee was the performance of the Fund.
The report says the fund overall delivered good returns, but the fund where millions of people live-more than 1/4-continues to perform poorly.
The report says placing pensions in an underperforming fund during an average worker's working life can lead to a 40% reduction in their retirement income.
"addressing multiple accounts and poor performance will increase retirement income for all Australians." She said. "even today's 55-year-olds could have a difference of 60,000 yuan when they retire. For those who are new to work, they may have an extra four hundred thousand yuan when they retire in 2064. "
People should have access to a list of "best performing funds" and choose which funds they think fit them.
The list will be selected by an independent panel of experts, and Australians should be free to switch to a better-performing fund.
The report says we should have clearer information when choosing pensions.
"now we have a lot of perplexity, some 40,000 options, and a lot of information doesn't understand."
"so a lot of people ended up picking a bad product."
"Pensions should be simpler and safer for everyone."
The report says pension insurance is also a problem. It is often not value for money, nor can it trigger claims.
The committee says some people end up choosing inappropriate insurance, including zombie insurance that they can't claim at all. Many are unwittingly covered by repeated insurance, which could cost them 50, 000 yuan less than their pension.