Australians could miss out on more than $130,000 in superannuation due to the “daunting complexity” of the superannuation system, according to a new report.
The report from the industry’s peak body, the Super Members Council (SMC), calls for reforms to simplify the system and make financial guidance more accessible as Australia faces what it has called a ‘silver tsunami’.
This wave of retirements over the next decade will result in 2.8 million Australians leaving the workforce, according to the SMC, which predicts a doubling of the annual number of retirees from 150,000 to 300,000.
It is estimated that the combined amount of super money these retirees will have will double from about $750 to $800 billion to about $1.5 trillion over the same period.
But it also predicts that an average retiree could lose as much as $136,000 — or $6,500 a year — over the course of retirement unless changes are made.
The report warns that “without new solutions, our current pension system will continue to impose too much complexity on retirees, overwhelming all but the most financially confident.”
SMC CEO Misha Schubert said the findings highlight “with new urgency” the need for a simpler, more intuitive pension system.
“We need to make the transition to retirement so much simpler, easier and more intuitive for everyday Australians,” she said.
“This challenge is incredibly urgent now as almost three million Australians race towards retirement in the coming years.”
Retire ‘with confidence’
The report also highlights growing problems as Australians live longer and retire with higher debt.
More than 40 percent of households nearing retirement now have a mortgage, while many are struggling with the way super handles the age pension.
Despite the strong demand for help, few retirees seek professional advice. More than 80 percent of pre-retirees said they would use free financial guidance from their super fund, but only half would pay for detailed advice.
Proposed reforms include automatically eliminating taxes from eligible accounts at age 65, revising minimum withdrawal rules for retirees with low balances, and introducing quality standards for retirement products.
The report also claims to debunk the “persistent myth” that retirees are underspending.
In the 2024-2025 financial year, 64 percent of retirees with tax-free accounts withdrew more than the required minimum, rising to 78 percent among those with a balance of less than $50,000, according to the SMC report.
“Moving to a system of simpler, smarter ways to retire would mean every Australian can retire with confidence, knowing they won’t miss 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 pension performance test – a review by the regulator – is underway.
“The aim is to refine and strengthen the performance test to ensure it does not create unnecessary barriers to investment, especially in key areas such as housing and energy,” he said at the Australian Chamber of Commerce and Industry gala dinner in Canberra on Wednesday evening.
“It’s about better aligning and unlocking investments that also increase 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 bill: It’s your money, you just didn’t know it was there,” he said.
The ATO estimates that around four million Australians have two or more super accounts, increasing the risk of duplicate charges and lost balances.
The average amount of lost or unclaimed super is $2,590, which the ATO says could amount to tens of thousands upon retirement if left unclaimed.
This article is general information. If you need financial advice, consult a professional.
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