“Alea iacta est!”
So declared Julius Ceaser, and the die was cast as he commanded his legion across the river Rubicon in 49 BCE, and into direct conflict with Rome. From that point, it was either defeat or glory.
Two-plus millennia later, the phrase “crossing the Rubicon” is considered the point-of-no-return, a new phase from which fresh paths must be forged, the old ones no longer tenable. As it now is with Australia’s superannuation system, 33-years-old in its modern incarnation, having grown from a sub-$200 billion collection of (mostly) corporate funds and public sector schemes pre-1992 into a $4.3 trillion colossus today.
But this isn’t a story of the $1.05 trillion in self-managed super funds (SMSFs), or the million or so Australians who are responsible for their own retirement affairs.
This is a tale of the other 16 million-plus members who are in one of the 87 remaining APRA-regulated funds operated by 58 Registrable Superannuation Entities (RSEs), who collectively are responsible for just over $3 trillion in member benefits as of 30 June 2025.
How significant have the changes to retirement policy been since the introduction of the Superannuation Guarantee on 1 July 1992? Well, consider the following.
According to Treasury, in 1986 superannuation only covered 46.5% of full-time employees and 7% of part-time employees. Further, in 1982-83 some 82% of all members were in defined benefit (DB) plan structures.
Today there is near-universal SG coverage for employees, DB assets account for less than 14% of total APRA-regulated assets, and 95% of member accounts are instead in defined contribution (DC) plans where individuals bear all the key retirement risks.
The winds of change
The entire super system is now encamped on the southern bank of the Rubicon, facing into the irresistible force of population ageing now bearing down upon it.
With the first of the Baby Boomers retiring in the early 2000s, what was once a trickle is turning into a metaphorical flood. According to the latest Intergenerational Report, the total number of Australians aged 67 or older is expected to roughly double from some 4.5 million people to around 9 million individuals by 2062-63.
If demographics are destiny, then the message for the 58 remaining RSEs should be loud and clear: continuing to preference asset gathering (the accumulation phase) over the retirement phase (decumulation) is unlikely to be a winning long-term strategy.
Retirement ready? From Cooper to Cole
Policy makers and retirement researchers have been warning of the growing decumulation tide in superannuation for almost two decades.
Take for example the 2010 Review into the Governance, Efficiency, Structure and Operation of Australia’s Superannuation System (the Cooper Review), which recommended the introduction of the MySuper regime.
Jeremy Cooper and his fellow panellists were at pains to make clear that “[while] much of the focus in superannuation is on the accumulation phase, the primary reason for the existence of Australia’s superannuation savings regime is to provide income for Australians in retirement”.
In fact, the recommendation for MySuper products was that they include one type of income stream product, so that members “can remain in the fund and regard MySuper as a whole of life product”.
That obviously didn’t come to pass. In hindsight, perhaps a golden opportunity squandered.
David Murray returned to the issue in his 2014 Financial System Inquiry final report, in which he recommended a requirement for a ‘Comprehensive Income Product for Retirement’ (CIPR) to be offered to retiring members on an opt-in basis, one that provided a blend of income stability, flexibility and some measure of longevity risk management.
The CIPR recommendation kicked off a flurry of industry consultation through 2014 and 2015, with the CIPR ideal morphing into a ‘MyRetirement’ product concept put forward by Treasury.
Much ink was spilled by the industry in submission writing (some of it mine), but when all was said and done, more was said than done; whereupon the industry’s focus drifted off to the implementation of the accumulation-only MySuper, and thereafter the 2021 commencement of the annual Your Future, Your Super (YFYS) performance test.
This reprieve from having to consider the needs of retiring members was brief however, with the 1 July 2022 introduction of the Retirement Income Covenant (RIC) requiring all RSEs to formulate, implement and regularly review a retirement income strategy to assist their members into and through retirement.
Funds now have a legal obligation to help members maximise their expected retirement income and manage the expected risks to the sustainability and stability of said income, all while having flexible access to their retirement funds. That’s no small optimisation trilemma.
Some super funds are, three years on, making a better fist of RIC than others, with Margaret Cole, the Deputy Chair of APRA recently noting that progress was “inconsistent across the industry”.
Cole also notes that most members approaching retirement today do not have confidence in their decision-making; a confidence that comes with “having access to easy-to-understand information about the options available to them, guidance on the retirement planning process, and the availability of suitable products and service offerings to meet their needs”.
It would be prudent for RSEs to take note of the growing regulatory impatience hinted at here.
Leaders and laggards
At the time of the final Cooper Review report there were some 700,000 pension accounts within APRA-regulated funds (2.3% of all accounts), holding collectively around $155 billion in assets.
Today that pension FUM sits at around $550 billion, and according to APRA estimates is tracking toward $3 trillion over the next two decades.
Baby Boomers will soon be joined by Generation X in looking to their super funds for help with retirement security. The pressures to deliver solutions to meet this growing retirement wave will only ratchet ever higher.
And that is where the cracks are appearing; the bifurcation of retirement measures into funds that are up and running with robust RIC programmes and those still on the ‘starters' blocks’, with recent APRA research indicating that 20% of RSEs can’t track the success of member assistance in balancing the trilogy of RIC objectives mentioned above.
For these laggard funds, the data gaps between what they know about their members and what they should are large, persistent and problematic.
The pressure to meet both the letter and spirit of RIC isn’t evenly distributed, however. It is very clear from member engagement, acquisition and retention trends across the key segments as to which funds are acquiring what types of members from whom.
Those funds that have optimised their funnels for the acquisition of higher balance, older, pre-retiree members with the intention of providing investment, operational and service excellence into-and-through retirement stand to benefit at the expense of those who haven’t.
Yesterday’s scale game is tomorrow’s service game
The past two decades were an institutional scale game, where the main success metric was accumulation net inflow, and top quartile returns plus low fees were the keys to success. Effectively, accumulation was a ‘just one cohort’ game where scale mattered above all else.
But now funds are across the Rubicon, facing a much different challenge; to morph into solution-oriented, retirement-focussed entities that can meet, in extremis, the ‘cohort of one’. These solutions might entail some combination of online tools and calculators, quality retirement education content/seminars, access to financial advice (whether online or in-person, in-house or outsourced) as well as innovative retirement income products.
We also know what that future might look like thanks to joint APRA/ASIC annual RIC reviews over the past two years, which have repeatedly pointed to the same RSE deficiencies; understanding members’ needs, designing fit-for-purpose assistance and overseeing RIC strategy implementation (including measuring and tracking the success of retirement income strategies).
The die is cast. There is no way back. The future belongs to those funds who can rise to the solution challenges ahead, driven by quality insights into member retirement needs, circumstances and preferences.
Harry Chemay is a Principal at Credere Consulting Services and has almost three decades of experience across financial advice, wealth management and institutional consulting. Credere Consulting Services assists clients across wealth management, FinTech and the APRA-regulated space, focussing on improving member retirement outcomes.