Gen X’s super slug if we delay climate change action Media Release

Sep 02, 2007 - 7:40am

Australia's Generation X stands to lose up to $1300 in superannuation each year of retirement due to delayed action on climate change according to new modelling backed by an online calculator.

The Climate Institute modelling shows that there is serious risk that delayed action will result in holders of superannuation funds having to work longer to build up greater funds or risk running out of money late in life when they are least able to cope with the loss of income.

"Because stock valuations are calculated on short term value, no one has looked ahead to measure what impact carbon pricing might have on stock values. Our modelling investigates that, and shows that if we are forced to take sudden action later, the adjustment in the stock market will adversely effect the superannuation payments of thousands of Australians," said Climate Institute Chief Executive John Connor.

"The modelling, which has input from Goldman Sachs JBWere and AMP Capital, looks at the data collected by the 44 Australian-listed companies that participated in the 2006 Carbon Disclosure Project and the likely impact of future carbon prices on company value. These companies represent over 80% of the ASX100 by market capitalisation."

According to Goldman Sachs JBWere's Head of Quantitative Research Andrew Gray, the model has taken a conservative approach which may even underestimate the impact of late policy action to address climate change.

"Past 2030 [the model] is probably even conservative in terms of carbon liability given how difficult it will be to bring the delayed action emissions down sharply," he said.

Economic analyses repeatedly show that early action is the safer course.

Analysis of the Government's ABARE modelling by the CSIRO's Energy Futures Forum comprising BHP Billiton, Rio Tinto, Westpac, WWF and ACOSS, shows that strong economic growth is set to continue if we take action:

Under all scenarios modelled, it is projected that both the Australian and world economies will continue to experience strong economic growth when carrying out greenhouse gas mitigation.

Additionally the Australian Business Roundtable on Climate Change found GDP continues to grow 2.1% pa with early action and increases from $0.8 trillion in 2005 to $2 trillion in 2050. This occurs while Australia reduces emissions by 60% by 2050.

"The impact on superannuation is just another example of how inaction now will simply pass on the cost of climate change to the next generation. This generation of political leaders in Australia, at APEC and across the world need to set decisive shorter term targets not just long term aspirational goals to ensure a speedy and cost effective path to reducing greenhouse pollution and avoiding dangerous climate change,"said Mr Connor.

Visit www.climateinstitute.org.au to calculate the dollar impact of delayed climate change action on your quality of life in retirement. Find out what this means in terms of forgone luxuries such as manicures, golf games and holidays.

Case Studies*

Jacinta ? aged 41

Jacinta aged 41, aims to retire at 60 and is expected to live until she is 86. When she retires in 2026, Jacinta opts to fix her annual super payments to fund her 26 twilight years. If governments delay on a national plan that significantly reduces greenhouse gas pollution, Jacinta will have $1339 less annual income due to a sudden jump in carbon prices around the time of her retirement which will result in a decrease in stock values. Jacinta will be faced with the option of working an extra 8.5 months to fund her retirement or having to further comprise her quality of life in retirement.

Stephen ? aged 39

Stephen is 39 and will live for about 20 years after he retires. He is the sole earner in his household and his retirement nest egg will be used to support his wife in retirement too. Without decisive government action on greenhouse pollution Stephen will have $675 less annual income during retirement. That's enough for a case of beer every week for the rest of his life.


Alison ? aged 43

Alison has calculated that she needs $1000 a week to support her desired retirement lifestyle which involves seeing Australia and more of the world. The Climate Institute's modelling of company valuations under delayed action to cut greenhouse pollution, leaves Alison with one week's less income per year, or just over $1000. That's one or two weeks of less travelling every year of retirement.

*These case studies are fictional. A full list of assumptions is in the preliminary findings report at www.climateinstitute.org.au.

Current Age

Gender

Intended retiring year

Target retiring age

Life Expectancy (years)

Length of retirement (years)

Change in weekly income for fixed income product at retirement age

Annual change in weekly income for fixed income product at retirement age

51

M

2016

60

82

22

$23.54

$1,224.00

51

F

2016

60

86

26

$27.05

$1,406.69

49

M

2018

60

82

22

$23.20

$1,206.18

49

F

2018

60

86

26

$26.66

$1,386.20

47

M

2020

60

82

22

$25.15

$1,307.63

47

F

2020

60

86

26

$28.90

$1,502.80

45

M

2022

60

82

22

-$8.86

-$460.67

45

F

2022

60

86

26

-$10.18

-$529.42

43

M

2024

60

82

22

-$16.94

-$880.84

43

F

2024

60

86

26

-$19.47

-$1,012.31

41

M

2026

60

82

22

-$22.41

-$1,165.46

41

F

2026

60

86

26

-$25.76

-$1,339.41

39

M

2028

60

82

22

-$13.00

-$675.80

39

F

2028

60

86

26

-$14.94

-$776.67

37

M

2030

60

82

22

-$6.16

-$320.50

37

F

2030

60

86

26

-$7.08

-$368.33

35

M

2032

60

82

22

-$4.86

-$252.60

35

F

2032

60

86

26

-$5.58

-$290.30

33

M

2034

60

82

22

-$3.39

-$176.17

33

F

2034

60

86

26

-$3.89

-$202.47

31

M

2036

60

82

22

-$1.47

-$76.31

31

F

2036

60

86

26

-$1.69

-$87.70

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