The next evolution of retirement

6 min read
6 min read

Every Australian should be grateful for our world class retirement system. It is the fourth largest in the world by assets (Melbourne Mercer Global Pension Index 2017) – a remarkable achievement for a country that ranks 53rd by population size (World Population Prospects 2017, United Nations). We truly are the lucky country and have benefited from three unshakeable retirement pillars:

  1. compulsory contributions to superannuation
  2. our cultural obsession with owning a home
  3. a generous age pension safety net.

Our retirement system was designed in the 1980s and is therefore heavily influenced by the cultural, social and political context that existed in that era. Things have changed, among them:

  • life expectancy has increased substantially
  • forecast asset returns remain depressed at historically low levels
  • home ownership rates are falling dramatically for younger workers
  • our workforce mix is changing from predominantly full-time to part-time
  • our economic activity mix has changed from blue-collar resources to white-collar services.

All of this points to a hard truth:

The pillars that have built our world-class retirement system won’t be able to sustain it long-term.

To understand why, we first need to explore how the concept of retirement itself came to be.

A brief history of retirement

The clichéd Aussie dream of retiring at 60 with a two storey home, a white picket fence and many years ahead of P&O Fairstar cruises is burned into our collective consciousness. However, turn the dial back a century and the concept of retirement didn’t even exist. Why? We didn’t live long enough!

Working life prior to World War I was hard yakka and mostly done by men. Men would work their entire adult lives with no real expectation of this ending before their final days. As their husbands passed away, women had no realistic way of maintaining their income levels or living standard. It was a catch-22 that meant no realistic prospect of a comfortable retirement for anyone.

The war economy of the 30s and 40s brought women into the workforce at the same time that great leaps forward in modern medicine and industrial development increased life expectancies and provided opportunities for less labour-intensive jobs. Ta da – the dream of retirement was born!

Making superannuation great again

As society evolves and member expectations change, superannuation funds will naturally expand the scope of their services and broaden their value proposition. The biggest competitive advantage they can leverage is trust. Time and again, in survey after survey, superannuation funds have come out on top as the provider from which customers are most comfortable with seeking advice (2016 Member Sentiment and Communications report, Investment Trends); more than their bank, broker, insurer, accountant or financial adviser.

At the same time, government support for our retirement system will likely diminish over time. Expect less concessional tax treatments for superannuation and pension investments and an ever-tightening means testing of aged pension welfare entitlements. This will be the only way future governments will cope with the forecast decline in the number of tax-paying workers supporting age pensioners from 4.5 to 2.7 by 2050 (2015 Intergeneration Report, The Department of Treasury).

Superannuation funds will need to pick up this slack, capitalise on the inherent trust placed in them by members and take on a much more comprehensive role in our retirement system. But how?

Some ways funds may be able to do this is by:

Formulating a comprehensive retirement strategy: if they weren’t thinking about this already, soon trustees will be obliged (by a new covenant in the Superannuation Industry (Supervision) Act 1993 (SIS)) to formulate a strategy to ensure an adequate retirement for their members and offer a Comprehensive Income Product for Retirement (CIPR). It won’t be enough for funds to just offer an account based pension and an annuity. Funds should think bigger – offering workforce re-entry and re-skilling programs; partnering with third party health and care providers to keep retirees in their homes for longer; and finally providing subsidised placements into aged care homes when the time is right.

Managing accelerating liquidity and sequencing risk: today funds have a much greater proportion of accumulation members than deccumulation members. This means that funds generally have more money coming in (contributions) than going out (pension payments). Their biggest problem is finding the right place to invest that growing pool of money over the long term. Very soon though, liquidity and sequencing risk will take on a new and much more important dimension as most funds move into a net outflow position. As billions and billions of pension payments are paid out, funds will need to ensure they are providing cost-effective downside protection, more closely matching their asset allocation with their liability profiles and providing goals-based investment strategies to their members.

Personalising member engagement through technology: there is a theory at the heart of much of the technology innovation currently occurring within superannuation funds – you can make members care about their super by tailoring their experience down to an individual level. This theory may be correct but there is a long way to go until we reach truly personalised experiences, and funds will need to be careful not to cross the creepy threshold (as Facebook has found out). However, if funds are able to truly understand member preferences and characteristics they can offer a unique and tailored service model. Embedding behavioural science techniques through technology will be the key. From machine learning to real-time payments to voice-enabled digital advice, a whole new fund-to-member dynamic will be created.

Responding to changing demographics and member needs: retirement as we know it won’t be around forever. People are living longer healthier lives and having more diverse careers. Retirement ages will increase naturally but also people will exit the workforce less suddenly. Watch for the emergence of retirement gap years where older workers take a year off to travel the world and re-enter the workforce in less demanding or less senior roles. Furthermore, as governments tinker more and more with the rules around superannuation, retirees will seek to diversify their sources of retirement income with other tax effective savings vehicles like investment bonds. The family home will remain a great source of security and wealth for retirees but expect more focus on unlocking this wealth to generate a source of retirement income. The government has even signalled in the 2018-19 Federal Budget their intention to rapidly expand the Pension Home Loan Scheme – and this is just the tip of the iceberg.

Australia needs to continuously evolve its retirement system to stay at the head of the global pack. Superannuation funds need to be both outwardly and inwardly looking – learning lessons from overseas markets and keeping close to their members’ needs. If we get it right, we will have a broader and more inclusive system which combines the best of retirement from around the world.

Picture of By Ashton Jones

By Ashton Jones

head of investments, retirement and new propositions

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Carmen Beverley-Smith

Executive Director - Superannuation, Life & Private Health Insurance, APRA

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Keynote 8 – Navigating the energy transition: opportunities, investor strategies and policy needs

Carmen joined APRA in March 2023 and holds the role of Executive Director, Life and Private Health Insurance and Superannuation.  

She has had an esteemed career in financial services, spanning over 25 years. She has held diverse leadership roles at Westpac and Commonwealth Bank of Australia, including across risk, transformation and change, product and portfolio development, and sales and service. 

Prior to joining APRA, she held the role of General Manager, Risk Transformation Delivery Integration at Westpac. This involved leading the group-wide implementation of a suite of solutions to uplift risk management capability and develop data, analytics and reporting. 

Carmen leads with a values-driven approach and a particular interest in developing and mentoring talent. 

She holds a Bachelor of Commerce and Accounting, is a certified Chartered Accountant and a Graduate of the Australian Institute of Company Directors. 

Amy C. Edmondson

Novartis Professor of Leadership and Management, Harvard Business School

Sessions

Keynote 8 – Navigating the energy transition: opportunities, investor strategies and policy needs

Amy C. Edmondson is the Novartis Professor of Leadership and Management at the Harvard Business School, a chair established to support the study of human interactions that lead to the creation of successful enterprises that contribute to the betterment of society.

Edmondson has been recognized by the biannual Thinkers50 global ranking of management thinkers since 2011, and most recently was ranked #1 in 2021 and 2023; she also received that organization’s Breakthrough Idea Award in 2019, and Talent Award in 2017.  She studies teaming, psychological safety, and organisational learning, and her articles have been published in numerous academic and management outlets, including Administrative Science Quarterly, Academy of Management Journal, Harvard Business Review and California Management Review. Her 2019 book, The Fearless Organization: Creating Psychological Safety in the Workplace for Learning, Innovation and Growth (Wiley), has been translated into 15 languages. Her prior books – Teaming: How organizations learn, innovate and compete in the knowledge economy (Jossey-Bass, 2012), Teaming to Innovate (Jossey-Bass, 2013) and Extreme Teaming (Emerald, 2017) – explore teamwork in dynamic organisational environments. In Building the future: Big teaming for audacious innovation (Berrett-Koehler, 2016), she examines the challenges and opportunities of teaming across industries to build smart cities. 

Edmondson’s latest book, Right Kind of Wrong (Atria), builds on her prior work on psychological safety and teaming to provide a framework for thinking about, discussing, and practicing the science of failing well. First published in the US and the UK in September, 2023, the book is due to be translated into 24 additional languages, and was selected for the Financial Times and Schroders Best Business Book of the Year award.

Before her academic career, she was Director of Research at Pecos River Learning Centers, where she worked on transformational change in large companies. In the early 1980s, she worked as Chief Engineer for architect/inventor Buckminster Fuller, and her book A Fuller Explanation: The Synergetic Geometry of R. Buckminster Fuller (Birkauser Boston, 1987) clarifies Fuller’s mathematical contributions for a non-technical audience. Edmondson received her PhD in organisational behavior, AM in psychology, and AB in engineering and design from Harvard University.

 

Daniel Mulino MP

Assistant Treasurer and Minister for Financial Services

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Keynote 8 – Navigating the energy transition: opportunities, investor strategies and policy needs

Born in Brindisi, Italy, Daniel was a young child when he moved with his family to Australia. He grew up in Canberra and completed his first degrees – arts and law – at the ANU. He then completed a Master of Economics (University of Sydney) and a PhD in economics from Yale.

He lectured at Monash University, was an economic adviser in the Gillard government and was a Victorian MP from 2014 to 2018. As Parliamentary Secretary to the Treasurer of Victoria, Daniel helped deliver major infrastructure projects and developed innovative financing structures for community projects.

In 2018 he was preselected for the new federal seat of Fraser and became its first MP at the 2019 election, re-elected in 2022 and 2025. From 2022 to 2025, Daniel was chair of the House of Representatives’ Standing Economics Committee in which he chaired inquiries; economic dynamism, competition and business formation and insurers’ responses to 2022 major floods claims.

In 2025, he became the Assistant Treasurer and Minister for Financial Services.

In August 2022, Daniel published ‘Safety Net: The Future of Welfare in Australia’, which aims to explore the ways in which an insurance approach can improve the effectiveness of government service delivery.