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Super wars: who needs to do what for retirees?

There’s no doubt that retirement is the new black. We’ve now reached the point where super fund accounts have moved beyond accumulation. We’re well into the decumulation phase seemingly suddenly noticing the massive wealth held by the nation’s super funds. As well as how they wield the power that comes with these significant investments.

Of course, quite a few academics and commentators have noted this influence along the way. But we do seem to have experienced an explosion in coverage of what super funds could and should do for the nation. It’s head spinning to say the least. Which begs the question whether we need to stop expecting super to be all things to all people and better apportion the different responsibilities to create a truly impressive, world class retirement income system?

What do we expect from our super?

A lot!

A quick look at some of the talking points about superannuation this year reveals a long list of nation saving activities we somewhat blithely expect super to deliver. To be fair, this ‘bonfire’ has been stoked by the funds themselves with grand responses to the news that they have not been delivering well on the Retirement Income Covenant requirements. Look over here, they seem to be saying, we’ll get those right and then take on even more responsibilities. But unrealistic expectations for the role of super are spread across the population. Australian super funds are being variously asked to:  

  • invest the funding needed to move seamlessly to alternative energy,
  • provide investment to solve the housing crisis,
  • ensure members have sufficient wealth for later life,
  • support the use of super savings to provide a deposit on first homes
  • fund aged care
  • undertake extensive financial literacy education for all members
  • and now create a 'package' or 'product' which rolls income streams and the Age Pension into one smooth flow of cash

The mind boggles – this is cradle to grave intervention indeed.

Particularly since basic adherence to the Retirement Income Covenant requirements has yet to be delivered by many funds, which means that members of these funds are not informed nor fully cognisant of their options and opportunities as they reach decumulation. This is a critical time and a critical need for such members.

Where does the fault lie?

Contrary to the popular aphorism, this failure is not an orphan. It has, in fact, quite a few fathers and mothers.

Perhaps it’s worth questioning whether Australia has been a victim of its own success? Back in the early 1990s, we were praised by the World Bank for having a world class retirement income system, which was then believed to consist of just three pillars (Age Pension, superannuation and private savings). But as mandatory superannuation was legislated in 1992, we have now had 30 years to anticipate the challenge of mass decumulation. And along the way countless inquiries and reports have confirmed disengagement and a worrying lack of financial literacy. And how have we responded at a national level? We haven’t.

The latest Treasury discussion paper again notes the need for solutions. But instead of jumping to the proposed ‘all-in-together’ product (combining income stream, Age Pension payments, maybe even home equity access), let’s start where we should have 30 plus years ago – by providing basic information for people who remain dazed and confused by the complexity inherent in our retirement income system.

There is also a problem of equity in retirement savings, the haves and have-nots. The playing field of superannuation has been systematically tilted over a decade or two, to the point that the more you have in super, the more your money will grow. Contrast this with the trajectory for those with median amounts in super ($178,808 for 60-65 year old males, $137,051 for same age females). Then there are those with zero super balances – 23% of women – and renting retirees (about 13%) who struggle to cover even basic bills.

So how can we rethink super? 

It’s high time that we ceased our fixation with ‘pot of money’ style thinking. Let’s face it, $3.5 trillion in savings is eyewatering. Most of us don’t actually understand what that amount of money even means. When I last wrote about super savings compared with Australia’s GDP it was 2016 and the ratio of super to GDP was 117%. It’s now 150% and rising. But obsessing over how much money we have amassed doesn’t solve the basic challenges super members are now facing.

Let’s start afresh by agreeing that just because this amount is huge, it does not follow that super should be everything to all people. As noted above, there’s a never-ending stream of ideas of how super funds should be invested to help different levels of government in Australia play catch up with infrastructure and energy initiatives that should have been tackled years ago. The role of super fund trustees is not to fill the gap left by governments. It’s to put members’ interests first by investing well and delivering well. Delivering well is not confined to returns on funds but also the delivery of support in both accumulation and decumulation phases. The type of support which is covered by the Retirement Income Covenant, in fact.

Prioritising super’s roles

We still seem to be working out the new definition of what super is and does. Back when it was introduced to the Australian Parliament, then-Treasurer John Dawkins stated:

‘The increased self-provision for retirement will permit a higher standard of living in retirement than if we continued to rely on the age pension alone. The increased self-provision will also enable future Commonwealth governments to improve the retirement conditions for those Australians who were unable to fund adequately their own retirement incomes.’ (superannuation guarantee bill 1992).’

The three-pillar system has since evolved into a five-pillar system of funding retirement, including home equity and work income. This is retirement 2020s style and with so many Australians entering retirement with a mortgage, these extra two pillars are both important.

How could we write a ‘job description’ for super that’s fit for purpose?

Here’s a suggestion, in order of priority:

  • Manage members funds well to deliver enhanced wealth for them to enjoy as one of their forms of income in the later years of their lives
  • Fully adhere to the requirements of the Retirement Income Covenant by assisting members to better match their needs with the opportunities and rules attached to the move from the accumulation phase to that of decumulation.
  • Offer appropriate retirement income products, relevant to superannuation. Do not try to ‘own the world’ or control access to other types of income such as Age Pension entitlements and home equity. Get your own house in order before creating these types of hybrids.
  • Offer financial guidance and general advice as legislation allows.
  • Consider whether the investment of member funds in different sectors which are favourable for the Australian economy also offers outcomes that are best for members. Or both? Members’ interests clearly must come first.

Who else needs to do some of the heavy lifting?

To be fair to super funds, although they are major players at the trigger point when members retiree, they should not be expected to play catch up with their members’ overall financial literacy.

The Federal Government needs belatedly to get serious about financial literacy. Very serious. Given our world-leading, chest-thumping, eye-glazing $3.5 trillion in super, why does this nation still lack a coherent financial literacy program? Successive governments have squibbed on this for decades and now, suddenly, super funds are meant to fill the gap? Which means that we are asking them all to separately reinvent the wheel? What a waste of time, money and resources. A comprehensive nationally approved financial literacy program could be delivered through workplaces with far greater efficiency.

And then there’s advice

We’ve been around the block a few times on the topic of financial advice. The Haynes Royal Commission which reported in 2019 shone a light on many wrongs. Sadly, the fallout has been a mass exodus of financial planners, to the point that there are insufficient advisers left to deliver support to the 800 or so Australians who retire daily. Full financial plans are too expensive for most Australians anyway. So more attention on the delivery of ‘episodic’ or ‘situational’ advice is key to helping retirees as they encounter the many different ages and stages during their transition to retirement. Short, subject-focussed financial advice at age 58, 60, 65 and 70 would help so many retirees to weigh up options and make informed decisions. But where are we at with this type of offering? Are we still desperately hoping robo-advice will fill the gap?

In short, we have a lot of catching up to do when it comes to the large-scale decumulation phase taking place in Australia right now.

Moving from saving to spending superannuation is not a simple process. Individual retirement income needs are based upon about 8-10 different factors, including

  • preferred retirement age
  • household expenditure
  • super savings
  • other savings
  • current housing
  • employment prospects
  • retirement goals
  • family needs and
  • health issues.

Centrelink entitlement is a highly targeted calculation. Super decumulation needs to be understood as equally complex, but just as doable. As a nation we became complacent while our super coffers were swelling. Now we need to step back and take stock. Not to roll all forms of retirement income into one, but to separate the processes of the five very different pillars of retirement and support retirees to understand each and every piece of the puzzle, in plain language.

Now that’s not too much to ask, is it?


Kaye Fallick is Founder of STAYINGconnected website and SuperConnected enews. She has been a commentator on retirement income and ageing demographics since 1999. This article is general information and does not consider the circumstances of any person.


December 18, 2023

Australia has a universal pension scheme,the same as other countries.The money is raised the same way ,taxes.People just give these taxes different names.

Australia evidently has a high pension if that is all you have to live on,tax free.Other countries do the same as Australia,different names, in the USA, 401K,IRA,Roth IRA in the UK then IRA,SIPPS and more acronyms.This is all over and above the age pension.

The 60% of average wages that was aimed for is attainable quite easy.The 60% is ~ $54K,made up of pension $44?K and $10K from super,all tax free as far as I know.Adjust accordingly. Every country does the same,base pension,then what you did for yourself. Taxation rules and bands are different in each country. To keep it simple wages = pension.The more I earn,the more tax they take off me,and the better off I am on an after tax return basis.Same as in every other country.

Try to become financially literate,and keep everything simple because it is simple.Pension + what I did for myself.I will pay tax if I have a high income .I will pay less tax the lower that income is. Try to pay $100K a year in tax and you will have a great life and retirement.

Pete Latham
December 18, 2023

A friend of mine, an Army Technical Trade instructor decided during his tenure that instead of teaching a period of “mechanics”, he would teach his students a combination of budgeting, financial literacy, entrepreneurship, and other “common sense “ financial practices. Years later, one of his students (by now obviously successful) bumped into him and thanked him profusely for introducing him to the secrets of successful financial management and independence. Note, that it was one student (perhaps by chance) that took advantage of the totally ad hoc and unscripted recipe for success. Similar statistics would probably apply to the general population. There is a plethora of free and sound financial advice on all types of media. The real trick is to stimulate and to find those persons who are ignorant of, and would benefit from the advice, and to stress the importance of financial independence. And that’s almost everyone…..especially those at secondary school ! Electives like conversational Chinese and Chemistry may be of benefit to a few, practical everyday economics, budgeting and money management are essential for all. How long will it take the educators to realise that syllabus construction needs to look at the end state and include financial management as a compulsory subject in the secondary school syllabus ?

Ray Cameron
December 17, 2023

I think Charles Dickens provided a good overview of life and financial planning in his 1850 novel "David Copperfied". Mr Micawber gave his two pieces of advice to David; (my words) first, don't put off to tomorrow what you can do today, and second, Income $20, expenditure $19.50, outcome happiness. Income $20, expediture $21, outcome misery..

December 18, 2023

agree 100%

john church
December 17, 2023

Why are super funds not funding housing ownership rather than rental homes ? this is an issue that would reflect a genuine interest in their members

December 16, 2023

Perhaps the reason for the perennial query of why money management is not taught in schools is rooted in the educational hierarchy. If you are of the cynical variety like myself you may conclude it is because of the inherent woke progressiveness of the administration who only know how to spend other peoples money and have no concept of proper process and budgeting themselves, and would be loathe to enlighten the young that there are alternative options.

December 17, 2023

Agree with your comments. Life skills including budgeting and investing should be taught in schools as part of the core curriculum. Students should have to meet a minimum standard to progress. Wouldn’t this solve a lot of life’s problems.

Peter E
December 15, 2023

I would like to know how much income 3.5 trillion dollars earns on an annual basis. It must be a huge number and I wonder if we could now stop contributing and live off the income or perhaps pay a universal pension..

December 15, 2023

A huge percentage of the $3.5 trillion is still in accumulation mode, so any income from that goes back to the account holders. What is in pension mode is not your money. You don't get to pay "universal" pensions from returns on assets which aren't universally owned. Keep your hands off my retirement funds, thanks.

That said, I've been unable to find out what percentage of the $3.5 trillion IS in pension mode. That would be a useful thing to know but I haven't yet located it using a variety of searches - which says a lot about Google's decreasing usefulness as a search engine for actual information, not commercial services.

Someone must know, however.

December 16, 2023

Nobody needs to know.As you say what is yours is yours.Why people think they need accurate figures baffles me.
$3.5 trillion @ 0.6% fees it is easy to work out.The customer gets the yachts,or the financial industry does?

The constant we need this that or the other,get the money from the super funds is ridiculous.

A universal pension is paid from contributions,NICS in the UK, HMRC collects in say £114 billion and pays out £110 billion last time I looked.You need 35 years contributions to get a full pension ~ £10,600.Everybody in the UK gets the same pension if they have 35 years contributions in.
Everybody in Australia gets the same amount from general taxation,then means testing kicks in.Taxation treatment is different in each country.

For income then you get a statement from your super fund,tells you what the growth was for that year,and the average over decades.

Last figures I saw Australia has 4 million people over pension age.,and 12 million workers.That seems perfectly reasonable to me.

As the super funds are diversified then call income 3.5% to 4% annually.The rest of the growth is from asset growth.For example CBA ( the main funder of my income) has gone from $5.40 to whatever it is today ( $110?) over 32 years.Dividend yield is reasonably constant 5% of $5.40 in 1991 to 5% of $110 for this year.I don't know why people want to argue and say it isn't, it is 4.8% or whatever,it doesn't matter.

There is nothing complicated about it.People seem to think it must be better if I can make it more complicated.

Simplicity is for making money,complexity is for taking money off you.Good luck trying to get people to see that,or trying to get them to understand compounding.

December 16, 2023

The last time I looked at the UK ,( I think it is ONS,office of national statistics) they do an 80 year plan much the same as the generational report here.Rough figures from memory were 2096 the pension would be 32% of average income,slightly more than the 29?% now.A quick bit of mental arithmetic I did at the time meant they were compounding ~4% for the full period.The pension would be around £ 2200 per week.If that was ~ one third of average wages then average wages would be £6,600 per week.So from the mid 1970s on my skills for hire days, if they are correct ,then from 1975 to 2096 wages go from ~ £60 a week to £6,600 a week.Work out what they are compounding it at and it will probably seem reasonable.If the NICs contributions are the same then the national insurance taken off wages (10% after the recent reduction)will be £660 per week from each employee.The employer contribution will be around 13 % if that doesn't change.So from 1946 to 2096 will be 150 years of the left hand collects it in,and the right hand pays it out.Some years a small surplus,some years a small deficit.
The problem is still the same,where are the young people to pay for the old people? I would think health care costs would be far higher than pension cost if people live for 30 years after a retirement age of say 70.

December 17, 2023

Not only is important to know how much is in pension mode in the whole superannuation system, but what the particular case is in your superannuation fund (non SMSF). A super fund whose membership if tilting towards retirement would need to change its investment strategies accordingly, unless it can bring in many younger members to keep funds coming in.

December 18, 2023

I'm not convinced on that one Abel.For me it was important to become financially literate.One article in the paper.The pension has increased to $100 per week,early 1980s.I looked at my net wages and thought that is a big drop in income for me/us.What can I do to increase my income in old age.

Understand compounding and try to plan for at least 30 years.You relax in the shade of the tree because you planted the seedling 30 years ago,40 years is better. CAGR will be better over a longer period.Buffett teaches that in every letter. Compound $14 at 20% for 58 years and there you have somewhere around the BRK share price.Rule of 72 doesn't really work there,even after the error you will still be happy doubling $14 every 3.5 years.If the answer is way out then start at $13 or $15 for the share price on the day you bought BRK.Accuracy doesn't matter.The concept does matter..If BRK is at $540K and you have answers between $450K and $600K I wouldn't worry in the slightest.

Let other people do what they want to do and see what they want to see.I can find out what my super has in in 30 seconds,go to the site.I can find out what the value of my shares is in 30 seconds,I go to the site. I know how things went on an annual basis when I do my tax forms.Long ago I gave up thinking that if I check once a day/ week/month it might mean something,it doesn't.Once a year is a pain in the proverbial.

Sheer simplicity ,if I replace earned income with dividend income,great.No mortgage to pay so an increase in income there.More money comes in from super,the cherry on the cake. The highest income ever for me is in retirement,the highest amount of tax I pay is in retirement. I let people get on with what we want to see. Kevin doesn't pay tax,he rorted the system,and any other delusion they create for themselves.

One simple thing,how do I avoid that drop in income when I retire (retired for quite a while now),what can I do to solve that problem.

I have never been able to understand why people think complication must be better than simplification.

Rule of 72 and the magic train. The one failing of the magic train was leverage,instead of saving $2.xx every day, why not use it to pay off a loan of say $4,000.I can understand why people don't use leverage,it can be very frightening.
My opinion ,life is a Ponzi scheme,we always need young people to pay for the old people.Whether this is through immigration or increasing birth rates I'll let them get on with arguing over different opinions.

December 19, 2023

Not hard to find if you know where to look! APRA statistics show that for funds with more than 6 members in June 2022 there was $556 billion in retirement phase, with a total of $2,411 billion in such funds. SMSFs are more likely to be in retirement mode. ATO figures indicate that in 2020–21 55% of SMSFs were wholly in accumulation phase, down from 58% in 2019–20, and 59% in 2016–17; 36% were wholly in retirement phase, up from 33% in 2019–20 and 30% in 2016–17 and the remaining 9% of SMSFs were in partial accumulation and retirement phase, consistent with 2019–20, and down from 11% in 2016–17.

Kenneth Beer
December 18, 2023

"I wonder if we could now stop contributing and live off the income":
Maybe if the population was stagnant (i.e. births less deaths plus net migration equals zero). After retirement we get to try to "live off the income". At March 2021, the proportion of the population aged 65 and over who received the Age Pension was:
38% for those aged 65–69
64% for those aged 70–74
82% for those aged 80–84.
"...or perhaps pay a universal pension":
New Zealand Superannuation (NZS), the foundation of New Zealand’s retirement income system, is a universal, pay-as-yougo (PAYG), taxable age pension, partially pre-funded by accumulated assets in the New Zealand Superannuation Fund. In Australia perhaps the Future Fund for Commonwealth public servants, set up by Peter Costello in 2005, is a blue print for a universal pension.

December 14, 2023

I was lucky enough to do a full year subject called Commercial Principles and Practice in secondary school which explained basic financial literacy. I just cannot understand why such a subject is not taught now. I also taught at TAFE for 22 years and apprenticeships had nothing about managing money in them, yet apprentices go on to run businesses. Only reluctantly was anything included in traineeships when they were introduced. Why are we so stupid?

December 14, 2023

Agree Peter - back in the day we did a subject called 'Home Economics' - a mix of home management, cooking, laundry (!) and budgeting - it was great ....Kaye

December 17, 2023

Perhaps they aren't that stupid though.Noel Whittaker explaining compounding in the 1980s,rule of 72.Wonderful for me,my branch of maths was geometry/ trigonometry .I only had a rough idea of how to compound over the long term.My fault,or the education system?

Noel again and the magic train.Save $2.57 per day( I forget the number) and in 30 years or whatever you"LL have $1 million.I think he was compounding it at 15% or whatever rate in the high interest period of the 1970s and 80s.Hard to believe and for most people they will not believe it,still.

I tried to teach apprentices simple concepts.Banging my head against a brick wall.One young lad that was very mature and a great kid grasped it,the old Buffett if you don't see it in 2 seconds you'll never see it.

An ANZ annual report when they had 10 years of history in them ,the 2001 annual report I think.From the low of around $2.60 in 1992 to the $10 or so they were in 2001.
People aren't going to buy when the price is low,they are terrified.Leverage and a DRP.If you'd borrowed $2600 and bought 1,000 of them,then invested the dividends into more shares you now have ~ 1800 shares shall we say. 1800 X 10 is 18,000.Do that for the rest of your life.

I don't know why but that simple concept seems to baffle 99% of people.No matter how many times it is explained to them.He saw it instantly,the only one that ever has.I doubt he did it .He will be around 40 now,probably forgotten the concept and thinks ANZ didn't do well at all ,$10 to $25 in ~ 23 years.I would doubt he even looks at a share price.

December 17, 2023

"Save $2.57 per day( I forget the number) and in 30 years or whatever you"LL have $1 million":

= FV(15% / 365.25, (30 * 365.25), -2.54, 0)
= $550,047.99

= PMT(15% / 365.25, 30 * 365.25, 0, 1000000)
= -$4.62 (- = in to fund)

"high interest period of the 1970s and 80":

No taxes then (bottom of Sydney Cove).

Steven Jackson
December 18, 2023

G'day Peter,
During my plumbing apprenticeship there was no financial literacy course, though in 1980 for the contractors license there was a Business principles subject included for the first time, surely they did not discontinue it. They always told us Truck drivers and plumbers were near the top of the bankruptcy list hence the subjects inclusion.

December 19, 2023

Steven, you may be interested in this, had reason to research UK's Voluntary Insolvency Register this year on behalf of others re small property developer ( he was on it), what jumped from the list was far & away the most on it were builders and all building related trades, the associated company had 15 charges (mortgages) registered against it, accounts showed Trade creditors was twice Trade debtors and zero cash at bank so seems not just a problem here re numerical/financial literacy.

December 18, 2023

Yes I was in the same era, and still remember some of the basics we were taught, which have stood the test of time. I am quite literate numerically, but I have to say the language around Superanniation rules seems to have been created by people with a deliberate aim to make it complicated. I live in fear that bureaucrats will coax MP's to create more complexity at every turn, and thankfully have had the foresight to keep a significant portion of our family savings under my own control.

My next challenge is to encourage our sons to acquire the knowledge they will need to build wealth on their own ahead of maybe inheriting something from us. If they aren't skilled and educated by that time it is easy to imagine them being overwhelmed or coerced into paying others to manage their wealth badly.

Darryl Middleton
December 14, 2023

As an overall concept Superannuation in Australia is a failure: There is insufficient evidence that mandated superannuation is even required. The idea that without superannuation people will not save for retirement and simply squander their money is a myth and was never backed by any real evidence. Super tax concessions for the most part benefit the wealthy with little if no benefit to the less well off. The cost in terms of tax concessions is undefined but no doubt it is massive and border on unsustainable. It is overly complex and confusing to most people. For instance, ask people what is an “super untaxed taxable element”, even most advisors cannot tell you. For all the cost, the benefit in retirement (for those with an average balance) is minimal. It has become a policitcal football and nothing more than a way for goverments to buy votes from older Australians.

December 16, 2023

What percentage of people live paycheck to paycheck in Australia?
48.4% of Australians live paycheck to paycheck or save less than 10% of their income. 1 in 3 have missed or made a late payment on a credit product or bill in the last 12 months.

How many Australians have less than $1000 in savings?
One in four (25%, or the equivalent of 720,000) have less than $1,000 in savings, including 8% (or the equivalent of 217,000) who have no savings.14 Nov 2023

Keating's description of Superannuation was that it was meant to part fund, or fund ones retirement and to create a national pool of savings, which it has done.

Where it has been let down is the constant rule changes.

December 14, 2023

Excellent point about a universal financial literacy program, but it should start at primary school, not at 58! And I’d happily put at least some of my super $s into a ‘nation building’ type investment option if it was available as a choice and the expected returns were reasonable in line with my overall investment objectives.

December 14, 2023

Agree Dave, school is the starting point for such financial literacy education. I pity teachers as they are now seemingly responsible for so much on top of the basic curriculum - sex education, manners, technological skills, whatever .....

Patrick Clarke
December 14, 2023

Great article, Kaye. You've distilled the different challenges very nicely. I totally agree with your point on financial literacy, and the role government has to play in that area. There are more options available to super funds to develop retirement lifetime income products that complement account-based pensions than existed three years ago. That's rapid development in our industry!

December 14, 2023

Please stop overstating the problems!

The existing system has accumulated the "capital" necessary to fund or assist in retirement. Well done Australia!

The existing system already has a methodology for drawing down Super in retirement - an age based percentage that increases as you get older. It is not perfect but it is not bad!

Where there are shortfalls it is the "connection" with Centrelink entitlements - the whole system is ridiculously difficult to understand. I hear zero commentators or regulators proclaiming from the rooftops that the system needs to be dramatically simplified so "ordinary folk" can understand!! Quite the contrary, all I hear from "experts" who are never retired, is about grandiose ideas how to fix what is not intrinsically broken, more complexity and more layers!

As to Home Equity, for the vast majority of people, selling a house and buying a cheaper one has been a "solution" for 100 years with zero waffle and zero "compound debt"!


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