Retirees could be missing out on up to $136,000, or $6500 a year, over the course of their retirement due to the complexity of Australia’s retirement system, according to a report by the Super Members Council (SMC).
The “Retirement revolution: Simpler smarter retirement” report models a variety of different scenarios that would produce better retirement outcomes. These scenarios include shifting super into the retirement phase once a person is over 65 and not working full-time, optimal drawdown size and timing, good-quality versus bad-quality superannuation funds and a growth versus defensive portfolio.
“We need to make the shift into retirement so much simpler, easier and more intuitive for everyday Australians,” SMC chief executive Misha Schubert said.
“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.”
The council said the report highlights the importance of the long-awaited financial advice reforms, along with the need for superannuation funds to develop and design simpler, smarter pathways into retirement that are much easier for everyday Australians to navigate.
The report also found around 700,000 Australians over 65 who are not working full-time still have their superannuation sitting in taxed accumulation accounts, lowering their disposable income in retirement.
In its roadmap for retirement reform, the SMC’s number one short-term recommendation is to expand access to simple, affordable financial advice and digital tools.
It also calls for safe and effective data sharing with government, which would enable funds to optimise incomes and offer retirement income dashboards to their members.
Longer-term reforms suggested were a simpler transition to tax-free income that included automatically removing tax from accounts at age 65 for eligible members, and applying a quality filter to all retirement products.
The SMC said reforms are critical given a “silver tsunami” of 2.8 million Australians is heading towards retirement in the coming decade, doubling the number of people retiring each year from 150,000 to 300,000.
The report also dispelled the notion most retirees underspend their super, finding drawdowns from retirement savings are now typically higher than the minimum amounts required, with 64 per cent of tax-free retirement account holders withdrawing well above the minimum pension amount in 2024/25.
