An ageing Australia is moving the superannuation system into a new, untested phase. As retirement accelerates, the focus is shifting from accumulation to the lifecycle of retirement – how super can support retirement income and spending, aged care, and the transfer of wealth. While these pressures have been anticipated for decades, they are now converging at scale and driving widespread industry change, writes Aaron Minney, Head of Retirement Income Research at Challenger.
The need for a reliable source of retirement income is a demographic shift 70 years in the making. Yet, it is only one of three megatrends currently disrupting the retirement sector.
An ageing population is placing pressure on Australia’s superannuation and retirement system, while driving a sharp rise in demand for better aged care. Underlying these trends is an equally significant issue that demands both preparation and attention: how to navigate the largest intergenerational wealth transfer in history.
While these trends might seem distinct, they are, in fact, interconnected and represent three stages of the same demographic reality – the age of retirement is here.
Retirement income: the first test
Australia is in the middle of a seismic demographic shift. More than 250,000 Australians will retire in the next year alone, with a further 2.5 million to follow over the next decade. This generation of retirees are wealthier than any before it, having benefited from three decades of the Superannuation Guarantee and sustained economic growth.
The challenge is not how much has been saved, but how those savings are being utilised. Moving from accumulation to spending is complex, both financially and emotionally. We know from the Challenger Happiness Index that activities, hobbies, and having a purpose are what keep us happy in retirement. Financially, having enough money to do the things we love, without the fear of running out, is the most important priority.
Knowing how much is “enough” is highly personal and a difficult question to answer. Getting it wrong can have significant consequences. Risks from rising inflation, volatile markets, generating cash flows, and financing a long life are challenges retirees have to navigate when securing an income for the long-term. Addressing these challenges requires a shift in mindset, a stronger focus on cash-flow certainty, and most likely, professional financial advice.
Today, the superannuation system is playing catch-up.
While retirement is a priority, many superannuation funds are still to deliver the full spectrum of support that a growing number of members need to navigate this sea change. There is both a product and an advice gap that will take time to resolve.
The recent APRA-ASIC 2025 Retirement Income Covenant (RIC) Pulse Check report made clear that the gap was widening between those funds that are actively promoting better retirement outcomes for their members and those that are not.
APRA and ASIC have called on Superannuation trustees to heighten their focus on member retirement outcomes. A call that Challenger echoes. To do so, funds and members will need to embrace new ways of thinking and new approaches that help Australians retire better – from digitally enabled advice to income-focused retirement products.
Innovation needs to be across the entire member experience from accumulation through to retirement. How can members be engaged earlier for retirement? How are solutions scaled to broad member cohorts? How can everyone get access to the advice and guidance they need? Innovation must span products, technology, advice, and engagement. It requires a whole of member approach to deliver the right outcomes.
Aged care: the next pressure point
Behind the surge in retirement sits a second, rapidly approaching challenge in aged care.
Australia’s population is ageing, and our people are living longer. Demand for aged care services is rising accordingly, and the system is already under strain. Over 3000 aged care patients are stuck in the public hospital system while they wait for a residential aged care bed to become available.
For families, aged care decisions are often made under significant emotional and financial stress.
Aged care changes introduced from 1 November have increased the means-tested co-payments, making accessing aged care more expensive for many Australians. Funding the up front and ongoing costs can involve major life decisions, like selling the family home. Deferring these decisions can have adverse impacts for the family involved as well as the broader economy.
Here, too, innovation and professional advice are critical. Families need support to structure their finances effectively, utilise social security entitlements, manage aged-care fees, and maintain sustainable cash flow.
Product innovation has a role to play too. For example, our Challenger CarePlus solution helps families manage the ongoing costs of aged care while at the same time providing an estate-planning solution. Thinking more holistically about the needs of the consumer is paramount to delivering solutions that work both practically and financially.
Wealth transfer: the final stage
The third challenge follows inevitably. In Australia, it is estimated that up to $5.4 trillion will transition between generations over the next two decades, reshaping the financial landscape.
However, structures to best manage this transition are still in their infancy. Insurers are well placed to innovate in this space and more products will come to market to support estate-planning and wealth-transition needs.
Australia is moving from a system designed primarily around accumulation to one that must now support spending, caring, and the transfer of wealth, simultaneously. That shift has significant implications for how super funds, and the broader industry, design products, deliver advice at scale, and engage with members across later life.
Retirement may be the most immediate challenge, but aged care and the intergenerational wealth transfer are close behind. Each presents distinct challenges, but together they form a triple threat that the superannuation system can no longer address in isolation.
By embracing new ideas, new products, and new approaches to financial guidance and member engagement, super funds have an opportunity to better support members through the lifecycle of retirement – from income to aged care and leaving a legacy – helping deliver greater confidence, security, and dignity through every stage of later life.
ASFA welcomes the diverse perspectives of our members. The views expressed are those of the author and do not necessarily represent ASFA policy.
