The ARC Centre of Excellence in Population Ageing Research (CEPAR) has released a series of three research briefs exploring the current state, and projected future, of Australia’s retirement income system, featuring findings from over 40 of CEPAR’s leading researchers. The briefs focus on the public and private elements of retirement incomes provision. They take stock of the Age Pension and its poverty outcomes, discuss how Australians will be able to convert superannuation into retirement income, and assess existing financial behaviour of consumers and how best to guide them.

Brief 1 describes the demographic context and structure of the system, how retirement resources compare across benchmarks, countries, and generations. Brief 2 focuses on the public, poverty-alleviation element of Australia’s retirement income, primarily the Age Pension. Brief 3 looks at private, income replacement provision, particularly superannuation.

“While the Australian retirement system compares well internationally and is among the most sustainable, there are challenges that need to be addressed. This dialogue is designed to assess Australian policy design, explore international trends and canvass recommendations for reform,” said CEPAR Director and UNSW economist Scientia Professor John Piggott about the related Policy Dialogue on Retirement Incomes, which took place at the Crawford School on 1 November.


Improved standards of living in retirement – except for renters

“Our analysis shows that standards of living of older people have improved over the last decade. About three in five older Australians can afford a lifestyle that is deemed to be above a modest level, according to a set of commonly used budget standards. And households reaching retirement age today have incomes about 45% higher than those reaching the same milestone ten years ago,” said Professor Piggott, a leading pension and retirement researcher and former member of the Henry Review panel.

“The overall view is that the system is unique, broadly affordable and suitable for most Australians. It costs less than 3% of GDP and keeps most out of poverty, but not renters,” he said.

“Australian old age poverty is low once we take account of housing, but the system fails renters. Home owners are significantly better off than renters,” said lead author Rafal Chomik, CEPAR Senior Research Fellow at UNSW Sydney.

“About 60% of lone renters are in poverty, which translates to low standards of living. For example, a quarter of pensioners who rent alone spend on average less than $6 on food per day. Our analysis suggests an increase in rental assistance payments of 40% would reduce lone renter poverty by almost 20 percentage points, at a cost of about $380m,” Chomik said.

Superannuation is an integral part of retirement income but consumers find it complex and need guidance

Older Australians are increasingly relying on private incomes with much of this coming from the Superannuation Guarantee. Two out of five older Australians now rely on non-public-pension income as their main source of income and one out of five receive no Age Pension at all.

The Superannuation Guarantee has attracted extensive policy attention and recent developments mean that it continues to be closely watched by pensions researchers and policymakers in Australia and overseas. Major areas of reform revolve around improving efficiency and developing a retirement incomes framework in which individuals will be better able to manage risks in retirement.

Evidence base for policy reform

“Australia is not ageing as fast as some countries, and boasts a retirement income system ranked among the best in the world. But it continues to be the subject of a series of reviews, reforms, and incremental refinements that seek to resolve remaining weaknesses,” said Professor Piggott.

“As population ageing moves from projection to reality and affects more people, any design flaws in retirement incomes systems will continue to attract attention by policymakers. CEPAR provides the research evidence base for policy reform to enable individuals, businesses and governments to respond better to demographic change and improve wellbeing,” he said.

The research briefs on retirement income in Australia are available to download at

(Source: CEPAR | Media release)

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