Skip to Content

PC News - October 2015

Superannuation policy for post-retirement

As part of a research series on policy issues that arise from population ageing, the Commission has completed a research report on two important elements of the retirement income landscape - when and how people access their superannuation.

The Commission examined what might happen if the age that people can access their superannuation - the preservation age - were gradually increased from 60 to 65 years.

Modelling undertaken to better understand the impacts of such a change suggested that, in 2055:

  • there would be a modest increase in the workforce participation of older workers of around 2 percentage points - mainly among those with higher wealth at or near retirement
  • households that delay their retirement would likely do so by around two years and would have superannuation balances around 10 per cent larger in real terms when they retire
  • there would be an indicative annual fiscal improvement of around $7 billion - mainly due to more tax revenue from wealthier households.

Changing the preservation age would have little, if any, impact on the many older Australians who retire involuntarily.

Currently, almost one half of men and around one third of women who retire between the ages of 60 and 64 do so involuntarily.

While the report has assessed the likely impacts of raising the preservation age, important implementation issues would need to be considered and resolved before any changes are made. For example, an appropriate safety net for those who become involuntarily retired would be a priority.

In examining how people draw down their superannuation, the Commission also found that most retirees are prudent. While the use of lump sums attracts much attention, the suggestion that their use is problematic is not supported by the available evidence.

Less than 30 per cent of superannuation benefits are taken as lump sums, with most superannuation benefits taken as income streams. Where lump sums are taken, they are most frequently used to pay down debt, invest in income stream products, and purchase durable goods that are used throughout retirement.

In undertaking its analysis, the Commission identified a number of features of the retirement income system that warrant more detailed analysis, and highlighted that there would be merit in a holistic review of retirement income policy.

Such a review would need to be informed by community consultation, so that any changes to the system could cater for the diverse circumstances of retirees.

A significant number of older Australians retire involuntarily

  • Number of people retiring, by age group and reason for retirement, 2011

There is little evidence that lump sum benefits are being squandered

  • Main uses of superannuation lump sums, 2012-13

Superannuation Policy for Post-Retirement

Newsletter homeNext article