$13.5 billion lost: the true cost for Aussies missing out on tax-free retirement
HESTA
31 March 2026
HESTA has launched a new white paper that highlights a significant blind spot in Australia’s retirement system.
The white paper – Make the move: guiding members to tax-free retirement – is a continuation of research insights released last month, providing further insight on how eligible Australians are missing out on billions of dollars in tax-free retirement savings.
It reveals for the first time that, collectively, eligible Australians likely missed out on up to $13.5 billion in tax-free investment returns between 2017 and 2025 simply by not transitioning their super into the retirement phase when they became eligible.
The white paper points to a simple solution: to let funds act in their members’ best interests at retirement by proactively transitioning eligible members into the tax-free phase of superannuation with the ability for members to opt out.
The research[1], commissioned by HESTA and conducted by Laneway Analytics, analysed diverse eligible groups of members and found that every member group is expected to benefit from transitioning to a retirement product when they become eligible – regardless of their balance, gender, homeownership status, or whether they have a partner.
Current retirement product take-up rates by eligible members are low – 30% at HESTA and 45% system wide. This is despite member education efforts and targeted communications within the limitations of the current advice settings. The solution put forward could deliver Australians up to 12% more money in retirement compared to those who delay transition by four years.
"Retirement should be a time when Australians can enjoy the rewards of a lifetime of work. Yet too many Australians are not making the move from saving for retirement to actually living in retirement – and the cost of that inaction is significant,” HESTA CEO Debby Blakey said.
“Without reform, the problem will only grow. We need system-level change to make it easier for people to access tax-free income in retirement.”
The research found that in FY2025 alone, 1.8 million Australians remained in accumulation phase despite being eligible to switch, collectively forgoing $2.5 billion in a single year. By 2030, nearly 3 million Australians are projected to be missing out on $5.5 billion annually.
HESTA is continuing to call for reform, advocating for a default with member opt-out, that would transition eligible members to retirement phase products at a certain age when they're no longer making contributions.
The white paper highlights how women disproportionately carry the cost of not transitioning to a retirement phase option – being the least likely to act under the current voluntary model. Female HESTA members have a take-up rate of just 29%.
"Women who have spent their careers caring for others often retire with more modest balances – and they are precisely the members least likely to make this transition on their own," Ms Blakey said.
The research suggests transitioning to a retirement income stream upon eligibility could boost a member's total retirement income by up to 12% depending on their circumstances, compared to those who delay by four years. This figure aligns with the median duration HESTA members remain eligible but do not transition. Such delays cost retirees both in the near-term and in the years ahead as the impact compounds over time.
"The research finds every eligible member cohort analysed is better off when they have access to a retirement phase option rather than staying in accumulation,” Ms Blakey said.
“That’s why we’re calling for a well-designed default mechanism that would seek to ensure no Australian is left behind simply because the system failed to guide them.”
HESTA’s white paper Make the move: guiding members to tax-free retirement was discussed at a roundtable event in Melbourne last week by sector leaders from funds, industry bodies, institutes and think tanks. The full paper is available here.
Ends.
[1] The Laneway Analytics modelling is based on assumptions including investment returns, the drawdown rate from income streams, actual member behaviour patterns, as well as combined superannuation and Aged Pension income. Further assumptions can be found in the white paper available here.
About HESTA
HESTA is one of the largest superannuation funds dedicated to Australia’s health and community services sector. An industry fund that's run only to benefit members, HESTA now has more than one million members (around 80% of whom are women) and currently manages approximately $98 billion* in assets invested around the world.
*Information is current as at the date of issue.
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HESTA CEO Debby Blakey
