Australia says pensions must prepare for retirees

The planned reforms will be announced by Treasurer Jim Chalmers at a pensions industry conference on Wednesday. The changes include giving Australians access to more online resources and information about their retirement options, and better retirement products. Regulations will be updated in the coming years, and the government is also planning a new reporting framework for retirement outcomes.

Australia is home to the world’s fastest-growing retirement savings pool, known locally as superannuation, or “super.” The industry’s total assets increased 9.1% in the year to June, and includes funds accumulated by government and private-sector workers.

“As our economy changes, population ages and the super system evolves, more and more Australians will draw down on bigger pools of savings, that they will rely on for longer,” Chalmers is expected to say in a pre-recorded speech on Wednesday, according to an extract sent to media outlets. “We are working to ensure there is as much of a policy and product focus on the retirement phase as there is on the accumulation phase.”

Government estimates show drawdowns from pensions over the next four decades will increase from 2.4% of the country’s gross domestic product to 5.6%, which Chalmers described as “part of the big demographic shifts shaping our economy.”

The industry’s growth has been fueled by compulsory contributions from employers which started out at 3% in 1992, and has gradually risen to the equivalent of 11.5% of workers’ wages. That amount is set to increase to 12% next July.

Industry leaders have acknowledged they need to do more to cater to people leaving the workforce, especially as they retire with bigger balances after being in the system for longer with contributions at a higher rate. Multiple surveys show people are anxious about retirement and are worried about running out of money. A number of pension funds are beginning to offer new products such as annuities.

“These changes will empower more Australians to make the most of their superannuation through more trusted information, better products and greater transparency,” Chalmers is expected to say in the speech, adding the package of reforms will give retirees “peace of mind” and help their retirement savings last longer. The government will consult on the changes next year.

Speaking at the conference on Wednesday, Association of Superannuation Funds of Australia Chief Executive Officer Mary Delahunty called on the government to lead and develop a national strategy for retirement.

“National strategic plans are comprehensive documents developed by governments to outline the vision, long-term goals and priorities for addressing critical issues affecting our nation,” Delahunty said. The strategy would including setting a standard for a dignified retirement and coordinating policy across different areas such as housing, health care and aged care.