In an opinion piece, money contributor Bec Wilson reports that research from super fund HESTA estimates 1.8 million Australians who could have moved their super into a retirement phase account have not done so, and could collectively be missing out on about $2.5 billion a year in potential tax savings. The article also discusses proposals to make it easier for people to access retirement income.
Australia's superannuation system has two phases. In the accumulation phase, investment earnings are taxed at up to 15 per cent and capital gains at up to 10 per cent. In the retirement phase, eligible members can receive investment earnings and capital gains generally tax-free, up to certain limits, though they must start withdrawing a minimum percentage of their balance each year, 5 per cent for those aged 65 to 75.
According to Wilson, some people do not know they can make the switch or how to do it, while others find the superannuation and age pension systems difficult.
Wilson outlines two reform proposals. HESTA chief Robbie Campo wants super funds to be able to automatically move eligible members into retirement accounts unless they choose to opt out. Actuaries Nick Callil and David Knox have suggested that every super fund offer a ready-made retirement pension with one-button activation, and they propose that people be forced into a retirement income stream at age 75.
Wilson expresses wariness about giving funds the power to move members automatically without significant scrutiny of what they are moved into. She argues that the retirement system is overly complex, making it difficult for retirees to access their own money or claim the age pension through Centrelink. She calls for the government to fast-track its Delivering Better Financial Outcomes reforms to make low-cost financial advice more accessible, and to simplify the age pension application process by using information it already holds.
Analysis
Why This Matters
- Many older Australians may be paying unnecessary tax on their super earnings, potentially losing thousands of dollars each year.
- The $2.5 billion in forgone tax savings could significantly boost retirement incomes if captured.
- With the Baby Boomer generation retiring now, the complexity of the system is creating a growing need for financial advice that many cannot afford.
Background
Australia's superannuation system has two phases: an accumulation phase, where savings are taxed as they grow, and a retirement phase, where investment earnings are generally tax-free but minimum annual drawdowns are required. Many eligible retirees remain in the accumulation phase, often due to lack of awareness or the difficulty of navigating the transition.
Key Perspectives
- Robbie Campo (HESTA CEO): Wants super funds to automatically move eligible members into retirement accounts unless they opt out.
- Nick Callil and David Knox (actuaries): Propose a ready-made retirement pension in every fund with one-button activation, and suggest mandatory retirement income streams at age 75.
- Bec Wilson (money contributor): Supports easing the transition but warns against automatic transfers without scrutiny, and calls for simpler age pension processes and faster financial advice reforms.
What to Watch
- The government's progress on the Delivering Better Financial Outcomes reforms.
- Whether super funds begin introducing one-click retirement products.
- Any federal parliamentary response to calls for a simpler retirement system.
Checked
11 claims in this story checked against 1 source: 11 supported.
Show each claim
- SupportedHESTA estimates 1.8 million Australians who could have moved their super into a retirement-phase account have not done so.WA Today - Latest News: “Research from super fund HESTA estimates that 1.8 million Australians who could have moved their super into a retirement phase account haven’t done so.”
- SupportedThose Australians could collectively miss out on about $2.5 billion a year in potential tax savings.WA Today - Latest News: “Collectively, they could be missing out on about $2.5 billion a year in potential tax savings forgone – just in one year.”
- SupportedRetirement experts propose automatic transfers or a one-click pension, and Wilson says some people do not know how to make the switch.WA Today - Latest News: “HESTA chief Robbie Campo wants super funds to be able to automatically move eligible members into retirement accounts, unless they choose to opt out. Two experienced actuaries, Nick Callil and David Knox have suggested a different way.”
- SupportedIn the accumulation phase, investment earnings are taxed at up to 15 per cent.WA Today - Latest News: “While you’re building your super, in the “accumulation phase”, your investment earnings are taxed at up to 15 per cent”
- SupportedIn the accumulation phase, capital gains are taxed at up to 10 per cent.WA Today - Latest News: “and your capital gains at up to 10 per cent.”
- SupportedIn the retirement phase, investment earnings and capital gains are generally tax-free, subject to certain limits.WA Today - Latest News: “your investment earnings and capital gains are generally tax-free, up to certain limits.”
- SupportedPeople aged 65 to 75 must withdraw a minimum of 5 per cent of their account balance each year.WA Today - Latest News: “For someone aged 65 to 75, the mandatory minimum drawdown is 5 per cent of the account balance”
- SupportedCallil and Knox propose that every super fund offer a ready-made retirement pension that members can activate with one button.WA Today - Latest News: “They want every super fund to offer a ready-made retirement pension, with the investment options and minimum withdrawals already worked out, that members can activate by pressing one big green button.”
- SupportedCallil and Knox propose that people be forced into a retirement income stream at age 75.WA Today - Latest News: “And their proposal goes further, suggesting people be forced into a retirement income stream (or retirement pension) at age 75.”
- SupportedWilson is wary of giving funds the power to move members automatically without significant scrutiny of the products and their suitability for members.WA Today - Latest News: “I’m very wary of giving every super fund the power to automatically move members into its own retirement products without significant scrutiny of what they’re being moved into and how that will serve their needs.”
- SupportedWilson calls for the government to fast-track the Delivering Better Financial Outcomes reforms and simplify age-pension applications using information it already holds.WA Today - Latest News: “starting with simplifying the age pension application process, using information it already holds ... the government’s long-delayed Delivering Better Financial Outcomes reforms, designed to make low-cost financial advice more accessible, also need fast-tracking.”