Australians could miss out on more than $130,000 in retirement because of the “daunting complexity” of the superannuation system, according to a new report.
The report by industry peak body the Super Members Council (SMC) calls for reform to simplify the system and make financial guidance more accessible as Australia faces what it has called a “silver tsunami”.
This wave of retirement over the next decade will see 2.8 million Australians leave the workforce, according to the SMC, which predicts a doubling of the annual number of retirees from 150,000 to 300,000.
It estimates that over this same period, the collective amount these retirees will have in super will double from about $750-800 billion to about $1.5 trillion over that same period.
However, projections indicate that without necessary adjustments, the average retiree stands to lose out on a substantial $136,000 throughout their retirement, equating to an annual shortfall of $6,500.
The report cautions that “without new solutions, our current retirement system will continue to impose too much complexity on retirees, which is overwhelming for all but the most financially confident”.
SMC chief executive Misha Schubert said the findings highlight “with fresh urgency” the need for a simpler, more intuitive retirement system.
“We need to make the shift into retirement so much simpler, easier and more intuitive for everyday Australians,” she said.
This issue is becoming increasingly urgent as nearly three million Australians approach retirement in the upcoming years, underscoring the pressing need for strategic financial planning.
Interestingly, despite a high demand for financial support, a significant number of retirees remain hesitant to seek professional advice. While over 80 percent of those nearing retirement expressed willingness to accept free financial guidance from their superannuation funds, only about half are inclined to pay for in-depth financial advice.
The report also points to rising challenges as Australians live longer and retire with higher levels of debt.
More than 40 per cent of households approaching retirement now have a mortgage, while many struggle to navigate how super interacts with the age pension.
The focus is on better aligning investments to enhance productivity without compromising the rigorous standards in place, ensuring that the primary emphasis remains on maximizing returns for members.
Proposed reforms include automatically removing tax from eligible accounts at age 65, reviewing minimum drawdown rules for low-balance retirees, and introducing quality standards for retirement products.
The report also claims to dispel the “persistent myth” that retirees underspend their super.
In the 2024–25 financial year, 64 per cent of retirees with tax-free accounts withdrew more than the minimum required, rising to 78 per cent among those with balances below $50,000, according to the SMC report.
“Moving to a system of simpler, smarter pathways into retirement would mean every Australian could retire with confidence, knowing they’re not missing out on money to pay the bills and enjoy their later years,” Schubert said.
Meanwhile, Treasurer Jim Chalmers has confirmed that a new round of consultation on the superannuation performance test — a regulatory assessment — is underway.
“The goal is to refine and strengthen the performance test to make sure it isn’t creating unnecessary obstacles to investment, particularly in key areas like housing and energy,” he said at the Australian Chamber of Commerce and Industry gala dinner in Canberra on Wednesday night.
“It’s about better aligning and unlocking investment that also boosts productivity, while maintaining a robust test and a primary focus on member returns.”
$19 billion in lost super
ATO deputy commissioner Ben Kelly said lost or unclaimed super can occur when accounts become inactive and funds lose contact with their members.
“Checking for lost or unclaimed super is like reaching into your pocket and finding a $50 note — it’s your money, you just didn’t know it was there,” he said.
The ATO estimates that around four million Australians hold two or more super accounts, increasing the risk of duplicated fees and lost balances.
The average amount of lost or unclaimed super is $2,590, which could grow to tens of thousands by retirement if left unclaimed, according to the ATO.
This article is general information. Please see a professional if you need financial advice.
