Actuaries Institute discuss performance of Australia’s retirement system

The Actuaries Institute recently released its report For Richer, For Poorer – Retirement Outcomes to tackle head-on Australia’s growing longevity issue. The discussion revolves around whether our current superannuation system can actually provide what it is designed to: adequate retirement outcomes for a range of retirees in a sustainable fashion. 

The last white paper on this topic published by the Institute was Australia’s Longevity Tsunami – What Should We Do?, which focused on the financial consequences of the government ignoring our long lives, with life expectancy outcomes changing quickly, requiring action by policymakers. 

For Richer, For Poorer assesses the super system by using comparisons of different generations, including the financial outcomes for those generations who are currently paying for the Baby Boomers’ Age Pensions. The Institute white paper argues that we can’t gauge the answers to these questions without superannuation legislation that determines our objectives clearly: a comfortable retirement as a minimum for everyone is still not ‘the point’ as laid out by law in Australia. This research has concluded that the superannuation system in Australia is in fact working, but it will not offer a comfortable retirement for all groups, particularly taking into consideration the working life that included the superannuation guarantee for older people. This makes the Age Pension a requirement for many groups.

What the paper discusses is the group of average income earners in between the richest and poorest in our society, for whom the superannuation system must function most optimally. There will always be those who fund their own retirement, and those who rely solely on social welfare, but this report is about the inbetweeners.

The report offers guiding principles for policy, and options on how to close the retirement income gap. These proposals include changing assets and means testing arrangements for the Age Pension (including how the family home is treated), tax reforms and concessions, encouraging later retirement, and taxing bequests.

The main point the report makes is that policymakers must first agree on the objectives of the superannuation system, and the research offers us some clues as to how this might commence.

Key findings of the report include:

1.      The Australian superannuation system is doing what it is supposed to – accumulating assets to fund adequate retirement incomes, and reducing reliance on the Age Pension.

2.      The poorest in the community will continue to be dependent on the Age Pension for even the most modest of lifestyles, with younger people better off due to a lifetime inside the Superannuation Guarantee (SG).

3.      The SG will reduce taxpayer subsidies for the Age Pension.

4.      While the portion of people accessing at least some Age Pension funds will not reduce much, the level of the part-Age Pension per person will.

5.      Current retirees may need to access home equity to supplement retirement incomes, particularly those who live longer than expected.

6.      Superannuation will remain an important Age Pension supplement for most people.


Older cohorts have more home equity, meaning they can use this equity to meet costs of consumption and aged care if they live longer than they expected. The work patterns of younger generations mean they are expected to have less home equity and higher superannuation account balances.

Younger, wealthier cohorts will possibly have lower total wealth due to home ownership, based on the models, but this model does not take bequests into consideration from older generations to younger.

Women and men fare differently in outcomes, with single men faring the same as couples, due to common lifestyle and work differences between genders, and longer life expectancy. A divorce or widowing usually makes a woman better off, due to inheriting her partner’s assets.

Delaying retirement has benefits mostly for the younger cohorts than the older, with a delay of five years estimated to increase income to life expectancy by around 20 per cent. If the Age Pension indexing was reduced by removing links to wages, it would increase inequalities and impact lower-income younger people. Changing the means testing would have the biggest impact on the wealthier cohorts, and have an equivalent effect on the old and young.

Living cautiously and reducing expenditure doesn’t promise sustainability of income, with pooling products possibly helpful.

The full report has all the findings and discussions. 

Download a full copy of For Richer, For Poorer in PDF