For a couple who are 65 years old now, one conventional measure­ says it could be $979,733.

The calculation is an inexact business, most particularly because superannuation accounts can earn an average of anything between 3 per cent and 10 per cent a year for their retiree owners.

Mano Mohankumar, research manager at consultants Chant West, suggests using an annual return­ number of 6 per cent for conventional account-based pensions. Given that most funds aim to return CPI plus 4 per cent, that’s a conservative estimate.

That top number comes from working backwards from the more predictable income number that the Association of Superannua­tion Funds of Australia says a 65-year-old couple will need every year to be comfortable, $58,784.

If that’s a 6 per cent return, then the couple will need $979,733.

But if they don’t like shares, bank deposit­s only provide about half as much interest so they would need close to $2 million to get the same outcome.

A single person hoping to be comfortable with a 6 per cent return­ would need to sock away $714,350 to provide $42,861 a year, according to ASFA.

What about the Age Pension, which provides a maximum equivalent of $33,982 for a couple and $22,542 for a single?

Current Treasurer Scott Morrison

Scott Morrison’s recent move to double the taper rate, the rate at which eligibility for the Age Pension disappears as assets climb, means that from 2017 couples­ with combined assets of $823,000 or more, aside from their currently exempted house, won’t be eligible even for a part pension. Until that change, the top asset limit for pension eligibility was $1.15 million.

Before the changes to the taper rate, a couple with $700,00 saved up could look forward to getting a part pension of about $17,500 a year on top of their super, but that will drop to $1460 a year.

The Treasurer’s answer to that is that they should be drawing down their savings, as super was never designed to be passed on to workers’ children

Couples aged 45 today will have to factor in 20 years’ inflation. Even at the current low level of 2.5 per cent a year, the effects of compounding will mean that the couple will have to save $1.6m to enjoy the same standard of retirement living as the $979,733 couple are looking forward to now.

Author: Andrew Main – Wealth Editor Sydney