This article was originally published in the print edition of Retirement Magazine Vol. 3

Much of today’s super and retirement policy discussion, including some of the debates about tax concessions for higher-balance members and superannuation product design, tends to centre on their needs. These discussions often focus on lifetime income products and more complex retirement solutions.

These issues are extremely important. But they don’t reflect the reality for all Australians. 

A large cohort of Australians enter retirement with modest superannuation balances, lower housing security, and an ongoing reliance on the Age Pension. For these Australians, the central challenge is not how to optimise a large pool of savings over decades. It is how to combine super, work and the pension to maintain financial security and flexibility in later life.

Under the Retirement Income Covenant, trustees must account for their distinct memberships, including access to the Age Pension, and design a Retirement Income Strategy accordingly. 

If we think about the retirement system primarily around those at the top end, we risk leaving this cohort behind.

Reflecting the needs of those with modest balances 

Australians retiring with modest balances are not a marginal group. They reflect the reality of a workforce characterised by part-time and casual work, career breaks, lower wages and rising living costs.

Rest’s membership provides a useful illustration of this reality. Rest members aged 60–69 have an average super balance of around $115,000, with a median balance significantly lower (note 1). Among members aged 60 and over who remain in accumulation, median balances are lower again.

These balances are not sufficient to fully fund retirement. They will need to be supplemented by another income source.

Housing further compounds the challenge. A significant proportion of older Australians do not own their home outright. Many continue to rent or carry significant mortgage debt into retirement. The fastest growing group of people experiencing homelessness in Australia is older women. Retirement income adequacy cannot be separated from housing security and affordability.

These outcomes are structural. They reflect how Australians work and live, not poor engagement with the super system.

Retirement doesn’t follow a clean break

Another key misalignment in the system is the assumption of a clean transition into retirement.

Increasingly, Australians continue working beyond traditional retirement age. Many move in and out of paid work, draw on super intermittently, or delay moving fully into retirement phase products (noting delays can come with a significant tax disadvantage). This reality sits uncomfortably with a system that assumes a binary shift from accumulation to decumulation. Many modest-balance members value flexibility and access to capital in times of need. 

Reform is sorely needed, including enabling members to make contributions into a super product that is paying a retirement income, and streamlining of the transition from accumulation to retirement phase.

Further, contrary to the assumption that retirees only draw the minimum, many draw more than required, often to manage debt, aged care, health costs or other expenses.

For many members, account-based pensions may remain the most appropriate retirement income solution, not because the system has failed to innovate, but because flexibility can matter more than product complexity.

A strength of the system: the Age Pension

This is where the retirement conversation must broaden.

Australia’s retirement system rests on three pillars: superannuation, private savings and the Age Pension. Yet the pension is too often treated as a residual safety net rather than a foundational component of the system.

For more than half of retired Australians, the Age Pension provides more than half their retirement income, and provides a core retirement income source for about 7 out of 10 Australian retirees (note 2). For those with modest balances, it delivers what lifetime income products seek to provide elsewhere: longevity protection, income certainty, and stability.

In this context, superannuation can play a complementary role – providing flexibility, liquidity and the ability to respond to life events. This interaction between super and the Age Pension is one of the strengths of the system.

To improve outcomes for modest balance retirees, we must design policy settings that recognise and strengthen this interaction. This includes building stronger pathways for members into appropriate retirement solutions, and better support for members who rely on the Age Pension.

Policy reforms needed

Several policy levers have an outsized impact on retirement outcomes for Australians with modest balances and receiving the Age Pension (note 3):

Work in retirement is one. Many retirees want or need to continue working. The Age Pension Work Bonus allows a small amount of income to be earned without reducing pension entitlements. However, the very high effective marginal tax rates above the Work Bonus threshold provide a significant disincentive to working after age 67. Increasing the Work Bonus payments threshold would allow retirees to earn more without reducing Age Pension entitlements, improving financial security while supporting workforce participation and wellbeing. It’s a commonsense reform. 

Housing support is another. Commonwealth Rent Assistance is critical for retirees who rent, yet despite some recent increases, it has simply not kept pace with significantly increasing housing costs. The ASFA Retirement Standard highlights the stark difference in retirement adequacy between renters and homeowners, with over three times the amount of super needed for a renting couple, compared to homeowners, for a “modest” retirement (note 4). With home ownership rates among older Australians projected to decline, this challenge will only intensify. Renters remain an extremely vulnerable group in retirement. 

Complexity remains a significant barrier. Applying for the Age Pension is often difficult, time consuming, and stressful. For many retirees, delays or confusion materially affect financial security. Radically simplifying application processes and improving data sharing between government agencies and super funds (note 5) would significantly improve access to entitlements. The super industry must be part of the conversation about how to make the Age Pension as accessible as it can be for Australians. 

The role of super funds

Super funds must continue to uplift their capability and support for members entering retirement. This includes better data, improved guidance, and more accessible financial advice. The Government’s Best Practice Principles for Superannuation Retirement Income Solutions will support these efforts. Reforms such as targeted super prompts and clearer advice frameworks have the potential to support better decision-making. The swift passage of the Government’s Delivering Better Financial Outcomes reforms is therefore essential.

But super alone cannot solve retirement adequacy for Australians with modest balances. For these members, outcomes depend on how well super integrates with the Age Pension.

Expecting increasingly complex products to compensate for structural income gaps is neither realistic nor equitable.

Designing for everyone

The current focus on retirement reform presents a genuine opportunity. But that opportunity will only be realised if the system is designed inclusively.

A retirement system that works well only for higher-balance members is not a complete system. A dignified retirement for all Australians requires recognising Government income support as a foundational pillar, improving and simplifying access to the Age Pension, and aligning policy settings with how members work, live and retire.

The challenge is not simply to build better retirement products. It is to design a retirement system that truly works for everyone.

Notes

1. Rest member data as at September 2025

2. The Conexus Institute (David Bell, Jeremy Duffield and Geoff Warren), September 2025. Retirement explainer series: Age Pension and other support for retirees.

3. More information on Rest’s policy reform recommendations can be found in Rest’s 2026-27 Pre-Budget Submission available at www.rest.com.au.

4. Association of Superannuation Funds of Australia (ASFA), ASFA Retirement Standard (December 2025 quarter). 

5. Rest has recommended the development of a framework for data sharing between government agencies and super funds, to uplift data integrity and support efficiencies across the system.