Complexity in the super system could cost new retirees up to $136,000 in retirement: new report

Super Members Council

A typical new retiree with super could miss out on as much as $136,000 (or $6,500 a year) over the course of their retirement due to the daunting complexity of Australia’s retirement system, a landmark new report by the Super Members Council has found.

The modelling highlights with fresh urgency the need to fast-track long-awaited financial advice reforms – and design simpler, smarter pathways into retirement that are much easier for everyday Australians to navigate.

A ‘silver tsunami’ of 2.8 million Australians is now racing towards retirement in the coming decade. This demographic influx will double the number of Australians retiring each year from 150,000 to 300,000.

And the amount of money these retirees will have in super by age 65 will almost double, too, rising from around $750 billion over the past decade, to almost $1.5 trillion over the next.

In a detailed reform blueprint - Retirement revolution: Simpler smarter retirement – the council comprehensively updates Australia’s evidence base on retiree incomes. It is the first such sweeping study series since the Government’s Retirement Income Review in 2020.

The report lays out the current complexity and rigidity of Australia’s retirement system – and illuminates how that complexity is a barrier to a simple and seamless transition into retirement for many Australians.

It also finds that around 700,000 Australians over 65 who are not working full-time still have their super sitting in taxed savings-phase super accounts, lowering their disposable income in retirement.

It calls for urgent short-term reforms to prepare the super system for the silver tsunami, including a need to:

• Expand access to simple, affordable financial advice and digital tools.
• Enable safe and effective data sharing with Government to enable funds to optimise incomes and offer retirement income dashboards to their members.
• Support Smart Retirement Pathways and suggest the best retirement income solution for them.
• Preserve flexibility and retiree choice.
• Fix issues that lead to dual super accounts for retirees.

It also proposes several bolder directions for longer term reform and further consideration including:

• Simplifying a transition to tax-free income, including considering automatically removing tax from accounts at age 65 for eligible members.
• Rethinking minimum drawdown requirements for Australians with low super balances so poorer retirees can also access the benefits of moving into the tax-free retirement phase.
• Strengthening consumer protection by applying a quality filter on all retirement products.

The report dispels a persistent myth that most Australian retirees are underspending their super, showing in fact that drawdowns from super are now typically higher than the minimum amounts required.

In 2024–25, around 64% of tax-free retirement account holders (two in every three retirees) withdrew above the minimum, with this proportion even higher for those with less than $50,000 in super (77%).

“We need to make the shift into retirement so much simpler, easier and more intuitive for everyday Australians,” said Super Members Council CEO Misha Schubert. “This challenge is now incredibly urgent as almost 3 million Australians start to race towards retirement in coming years.”

“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 life to the fullest.”