Introduction to Australia’s Retirement System
The retirement system in Australia has undergone significant changes over the years, with the introduction of compulsory superannuation being a major turning point. A recent report by the Super Members Council has shed light on the impact of this system on retirees, particularly those in the middle and low-income groups.
Benefits of Compulsory Superannuation
The report found that new middle and low-income retirees in the middle wealth group have been the biggest beneficiaries of compulsory super, with an average of $11,388 extra to spend each year. This increase in retirement income is a significant boost to their standard of living, allowing them to enjoy their golden years with more financial security.
The Impact on Taxpayers
Without compulsory super, the report estimates that half a million more Australians would rely on the Age Pension, resulting in a significant burden on taxpayers. This would cost taxpayers $12 billion in 2026-27 and $14 billion in 2028-29, highlighting the importance of the superannuation system in reducing reliance on government support.
The Rise of Superannuation
The report, titled "The Retirement Revolution: Super’s Coming of Age," is the first comprehensive study on Australia’s retirement incomes since the Government’s Retirement Income Review in 2020. The modelling by the Council showed that the newest retirees in the middle wealth group are receiving an average of $20,800 a year more in super income than similar retirees two decades ago. This represents a significant increase in retirement income, with super balances more than tripling for middle wealth retiree households and more than doubling for the second-lowest wealth retiree households over the past two decades.
The Changing Landscape of Retirement
The proportion of people in their 70s with super income has tripled over the past 20 years, indicating that superannuation is lasting longer into retirement years. Before the introduction of universal super, financial assets were concentrated in the wealthiest 10% of households. However, with the introduction of super, these assets are now spread across every income group, thanks in large part to superannuation.
Vulnerable Groups
While superannuation has transformed retirement for many, the report highlights that some groups remain vulnerable. Retirees who rent, live alone, or retire involuntarily due to health or caregiving responsibilities face significantly lower incomes and wealth. Women, single retirees, and those in insecure work are also more likely to be disadvantaged due to unpaid super, lower lifetime earnings, and less access to tax concessions.
The Need for Reform
The report underscores the need for targeted reforms to ensure superannuation delivers for all Australians. With an ageing population, rising mortgage debt in retirement, and complex system settings, the retirement income system will face increasing pressure. Super Members Council CEO Misha Schubert notes that while the super system is doing what it was designed to do, there is more work to be done to ensure it works better for those who need it most.
Conclusion
In conclusion, the report by the Super Members Council highlights the significant benefits of compulsory superannuation for middle and low-income retirees in Australia. While there are still vulnerable groups that require targeted support, the superannuation system has been a great social and economic success story for the country. As the population ages, it is essential to build on this success and ensure the system works even better for those who need it most, providing a more secure and comfortable retirement for all Australians.
