The modelling in the whitepaper was based on the ASFA Comfortable Retirement Standard at March 2018 which was $42,764 per year for a single and $60,264 for a couple over a 30-year period.

It assumed the retirees were homeowners, and it took into account the aged pension.

Using a dynamic spending strategy, Vanguard calculated that a single homeowner would need $686,000 to meet the ASFA Comfortable Retirement Standard with 95 per cent probability, while a couple would need $812,000.  

Speaking at a media event in Sydney, Vanguard senior investment strategist Nathan Zahm said this was based on the assumption that total investment costs, including advice fees, were 50 basis points per annum.

“If you start paying more in fees you need more of an initial balance to meet that same income objective,” explained Mr Zahm.

“If hypothetically you increase that 50 basis point cost to 100 basis points, you have roughly a 10 per cent increase in the amount of money you would need at the point of retirement to have the same confidence in meeting your objective.”

If it was to increase 100 basis point up to 150 basis points, then the amount of assets needed at retirement increases by 20 per cent.

“So it’s about a 10 per cent increase in the balance you would need for that first 50 basis point increase in cost and about a 20 per cent increase for a 100 basis point increase,” he explained.

Vanguard head of corporate affairs Robin Bowerman said cost in the accumulation phase is important, but cost in the drawdown phase is critically important, especially in a low-return environment.

“Just 50 basis points can make a significant difference over 30 years when you’ve got a relatively low-return environment,” he said.