$2.5 Billion Superannuation Issue Costs Retirees Dearly

Rowan Ashford

Published: February 6, 2026 8:10 PM ET

The superannuation system in Australia faces a significant challenge, particularly affecting retirees. A growing number of Australians are nearing retirement, often with insufficient savings. This trend is expected to increase over the next decade, as individuals approach retirement age with limited confidence and financial knowledge.

$2.5 Billion Superannuation Issue Costs Retirees Dearly

Research indicates that millions of Australians are missing out on substantial retirement savings. A survey conducted by Laneway Analytics for HESTA found that approximately 1.8 million Australians lost around $2.46 billion due to remaining in the accumulation phase of superannuation when they were eligible to transition into a tax-free retirement phase. This behavior is especially prevalent among those with lower super balances.

Consequences of Delaying Transition

Remaining in the accumulation phase can have serious financial consequences. Delaying the transition to the retirement phase may reduce total retirement income by up to 12%. For individuals delaying their transition by just four years, this could mean missing out on as much as $99,000 in retirement savings.

The Need for Change

Many retirees are either disengaged from their superannuation or lack access to meaningful financial advice. The current system often leaves them feeling overwhelmed and underprepared for financial decisions. It is crucial for super funds to play a more active role in guiding members toward suitable retirement-phase solutions.

Proposed Solutions

HESTA has proposed several changes to improve access to retirement-phase accounts:

Enable funds to actively encourage eligible members to transition into retirement-phase accounts.
Implement automatic transitions for inactive members, with the option to opt out.
Develop better digital guidance tools to help members navigate their retirement options.

HESTA’s approach aims to streamline the process for those about to retire. This would minimize unnecessary tax liabilities and maximize the benefits of their superannuation funds. Currently, many retirees remain unaware of the available options that could enhance their financial security.

International Comparisons

Other countries, particularly the UK, are already adopting similar strategies. The concept of “guided retirement journeys” is gaining traction, which provides structured support to individuals transitioning to retirement income. This approach has led to significant improvements in how retirees manage their pensions.

Conclusion

The superannuation system in Australia needs urgent reform to support the impending wave of retirees. As the landscape evolves, it is imperative for policymakers to prioritize transparent, accessible, and tailored solutions to help Australians make informed retirement decisions. By addressing these gaps, Australia has the potential to ensure that retirees enjoy a dignified and financially secure retirement.