Advice reforms need to be pushed through to help retirement outcomes: SMC

The SMC’s modelling shows that retirees could be missing out on $6,500 per year over the course of their retirement and highlights the need to fast-track long-awaited financial advice reforms.

More than 2.8 million people are set to retire over the next 10 years doubling the number of Australians retiring each year from 150,000 to 300,000 and the amount of money these retirees will have in super by age 65 will also almost double, rising from around $750 billion over the past decade to almost $1.5 trillion.

The retirement revolution: simpler smarter retirement report is the first sweeping study series since the government’s retirement income review in 2020 and lays out the current complexity and rigidity of Australia’s retirement system, illuminating that complexity is a barrier to a simple and seamless transition into retirement for many Australians.

It also found around 700,000 Australians over 65 who are not working full-time still have their super sitting in taxed savings-phase super accounts, lowering their disposable income in retirement.

The SMC is calling for urgent short-term reforms including expanding access to simple, affordable financial advice and digital tools.

It also recommends super funds be enabled to share information with the government to optimise incomes and offer retirement income dashboards to their members, as well as support smart retirement pathways for the best retirement income solution.

Furthermore, it is calling on the preservation of flexibility and retiree choice and for a solution to issues that lead to dual super accounts for retirees.

Additionally, the SMC is proposing directions for longer-term reform and further consideration including simplifying a transition to tax-free income that would encompass considering automatically removing tax from accounts at age 65 for eligible members.

The council also suggests the government rethink minimum drawdown requirements for Australians with low super balances so poorer retirees can also access the benefits of moving into the tax-free retirement phase.

The report dispels a persistent myth that most Australian retirees are underspending their super, showing that drawdowns from super are now typically higher than the minimum amounts required.

In 2024-25, around 64 per cent of tax-free retirement account holders withdrew above the minimum, with this proportion even higher for those with less than $50,000 in super.

Misha Schubert, CEO of the SMC, said there is a need to make the shift into retirement so much simpler, easier and more intuitive for everyday Australians.

“This challenge is now incredibly urgent as almost three million Australians start to race towards retirement in coming years,” she said.

“Moving to a system of simpler, smarter pathways into retirement would mean every Australian could retire with confidence, knowing they’re not missing out on money to pay the bills and enjoy life to the fullest.”