Safety net begins to fray as mental health and money pressure hits: CALI

In its report, titled 2025 State of Australia’s Safety Net, CALI has highlighted that its findings “paint a picture of a nation under pressure”.

Younger workers struggling to find secure employment, mortgage stress and pre-retirees concerned their savings will not be enough to sustain them in retirement are some of the pressure-points cited as worrying Australians.

“Whether they’re starting out, raising a family, or approaching retirement, working Australians want the same thing: confidence that if something goes wrong, there is a system to fall back on,” said CALI CEO Christine Cupitt.

“Right now, rising mental ill-health, cost-of-living pressures, and limited access to advice are eroding that confidence.”

With mental ill-health now being the leading cause of total permanent disability claims in Australia, increased pressure on working Australians only means more strain on the already stretched life insurance industry.

Alongside insurers paying out more than $2.2 billion in retail mental health claims in 2024 – almost double the amount paid just five years ago – the latest CALI and KPMG Cause of Claims Results report found mental ill health is also driving one in five income protection claims, with payouts totalling $887 million last year alone. Cuppitt described this as a “tipping point.”

Of particular focus in the report is the decline of Australians’ mental health, especially in the post-Baby Boomer generations.

Citing data included from SuperFriend’s Indicators of a Thriving Workplace survey, CALI highlighted that gen z and millennial Australians are entering the workforce with “heightened psychological distress” including burnout. Gen x Australians also cited their workloads as the most and were ranked as the most likely to be working more than 40 hours a week.

“Across industries, we’re seeing that financial distress, burnout and psychological strain are strongly interconnected,” said Dr Natalie Flatt, chief mental health advisor at SuperFriend.

“When people are struggling at home, it shows up at work, and when workplaces don’t feel supportive, it makes recovery harder. A strong safety net starts with compassionate leadership and psychologically safe workplaces, where employees feel safe to share challenges and access the support they need to stay well.”

The report also found financial strain is widening the protection gap, with seven in 10 working Australians saying cost-of-living pressures are affecting their ability to maintain life insurance. One in three are very concerned, especially those aged 35 to 54 managing mortgages and family expenses.

Cupit concluded that the report’s findings highlight the need for urgent, co-ordinated reform.

“If we strengthen the system now, it will be there to catch more Australians tomorrow,” she said.

Reform and change CALI is calling on the government to enact includes:

- Legislating the Delivering Better Financial Outcomes reforms to close the growing advice gap

- Establish mental health targets, find early access treatment, and address workforce shortages.

- Establish clear pathways to enable pre-retirees to purchase lifetime income streams for a smoother transition into retirement.