Super funds must solve retirement phase or risk locking trillions out of the economy: CPA Australia

Australia’s largest accounting body, CPA Australia says that while Australia's superannuation system has succeeded in helping people grow their retirement savings, it struggles with helping retirees convert their super balances into income in retirement.

Superannuation Lead Richard Webb said the new Retirement Standard from ASFA comes amid concerns that many retirees are reluctant to draw on their super savings, despite Australia managing one of the world's largest retirement asset pools.  

"That's exactly what the retirement standard measures. It focuses on the income retirees need to fund a comfortable or modest lifestyle, not simply the amount of super they have accumulated.” 

Mr Webb said Australia's superannuation system had delivered impressive results – helping build a retirement savings pool of around $4.5 trillion, but the retirement phase remained a major weakness. 

"For all the success of Australia's superannuation system in building one of the world's largest pools of retirement savings, the industry continues to struggle with the most important transition of all: paying members an income when they retire. 

"The uncomfortable reality is that super funds have become very good at collecting contributions and growing balances, but far less effective at helping retirees convert those balances into sustainable income streams that they feel comfortable spending.” 

Recent industry research highlighted a lack of consistency on how retirees should be supported in retirement, with no agreed best-practice approach to retirement income products, retirement income strategies or large-scale advice delivery. 

“As a result, many retirees are left to navigate a complex set of choices about account-based pensions, longevity risks and drawdown rates on their own.”

Mr Webb said the consequences extend beyond retirement and poses broader economic challenges.

"This is not just a superannuation issue. It's an economic issue. There’s a risk that trillions of dollars remain locked away in retirement savings simply because the onus is on retirees to switch their retirement income on.

"If Australians are overwhelmed with paperwork when attempting to draw down their super, our economy misses out on spending, investment and productive growth."

Mr Webb said that the confidence in the long-term future of the superannuation system should not be taken for granted, particularly among younger Australians. 

"Public confidence in compulsory super will depend on whether Australians can see the system helping people achieve a better retirement, not simply higher balances during their working lives.”

Mr Webb said helping Australians navigate the shift from accumulating savings to spending them should now be a central priority for policymakers, regulators and super funds.

"We've spent decades building one of the world's most successful retirement savings systems. The next challenge is ensuring that entering a secure and dignified retirement is as simple and effective as the process of saving for it.

"Australians should not have to navigate a complex maze of products, rules and decisions just to access an income from the savings they've spent a lifetime building. The system must do more to help retirees convert their balances into secure, sustainable retirement income."

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