I was on the panel of the Retirement Income Review. These are our findings

Dr Deborah Ralston explains how the panel has established a valuable fact base on the retirement system.



In September 2019, I was invited to be a panellist on the Retirement Income Review, an independent inquiry recommended by the Productivity Commission.

With fellow panellists Mike Callaghan AM PSM, chair of the Aged Care Financing Authority, and Board Director Carolyn Kay, member of The Future Fund Board of Guardians, we were tasked to assess the sustainability of Australia’s retirement system.

Released by Federal Treasurer Josh Frydenberg late last month, the Retirement Income Review makes no recommendations, but establishes a fact base on the retirement system.

Arriving at an objective evidence base will improve understanding of the operation and outcomes being delivered and facilitate the objective decision-making required to build a better retirement system for all Australians.

The pillars of the Age Pension

At the heart of our retirement system are the three pillars of the Age Pension, compulsory superannuation, and voluntary savings (including voluntary super, housing and other financial and non-financial assets).

These three pillars sit with the broader economy which offers other forms of support for retirees through the tax and transfer system, such as commonwealth rental allowance, and the seniors and pensioners tax offset.

Retirees also receive ‘social transfers in kind’ such as health and aged care services, which are substantial in Australia and in many ways form a fourth pillar of the system.

The retirement system is complex, and the experience and diversity of the Australian population mean that different groups will have a varied experience of the retirement system and achieve different outcomes.

This complexity and diversity created something of a challenge for the review.

Shaping a framework

A framework was needed to draw together all the parts of the system and assess its operation and outcomes across the diversity of the population.

The primary plank of the framework adopted was adequacy – do Australians receive an adequate retirement income, both now and into the 40-year time horizon?


Retirees also receive ‘social transfers in kind’ such as health and aged care services, which are substantial in Australia

We considered equity – Do the different groups within the system receive equitable treatment? For example, we considered the experience of different groups such as women, Aboriginal and Torres Strait Islanders, those with a disability, home-owners and non-home-owners, and involuntary retirees.

We also asked the question: is the current system sustainable?

There is a clear trade-off between adequacy and sustainability, we want to look after older Australians, but at the same time not create an unfair burden for tax-payers now and in the future.

And finally, the fourth plank of the framework was cohesion.

Do the three pillars of the system work together effectively, how well is the system understood and are retirees able to make the best of their post-employment years?

Collecting the data for this ambitious project was a major task. A consultation paper went out in November 2019, generating over 430 submissions.

The three-panel members and secretariat held more than 100 meetings with interested parties, commissioned a range of research, undertook various literature reviews, and collected a substantial amount of data from various government departments and other sources.

Modelling was undertaken to analyse long-term, broad, population-wide trends in retirement outcomes using Treasury’s Model of Australian Retirement Incomes and Assets (MARIA), and a retirement income cameo model (EMORI) analysed the outcomes for individuals across the income distribution.

Final report and conclusions

The Final Report released in November 2020 comprises around 650 pages. While it does not make recommendations, it does draw the following conclusions:

  • The Australian retirement income system is effective, sound and its costs are broadly sustainable.
  • The Age Pension, combined with other support provided to retirees, is effective in ensuring most Australians achieve a minimum standard of living in retirement.
  • Renters and involuntary retirees, however, experience higher levels of financial stress and poverty than the working-age population.
  • Compulsory superannuation through the Superannuation Guarantee (SG) allows people to achieve a retirement income that better reflects their pre-retirement income.
  • For most people a replacement rate of 65-75 per cent allows a person to balance living standards across their working life and retirement.
  • The weight of evidence indicates that increases in the SG rate result in lower wages growth and would therefore affect living standards in working life.
  • Voluntary superannuation provides flexibility for people to save more than the SG or catch up after periods out of the workforce.
  • The home is the most important component of voluntary savings and is an important factor influencing retirement outcomes
  • Changes that could improve the fairness of the retirement income system include removing the $450-a-month threshold when the SG is paid; paying the SG on parental leave; giving greater visibility of superannuation balances in divorce settlements; extending the SG earnings base to include overtime, and ensuring workers receive the SG to which they are entitled.
  • While the Age Pension helps offset inequities in retirement outcomes, the design of superannuation tax concessions increases inequality in the system. Tax concessions provide greater benefit to people on higher incomes.
  • The cost of superannuation tax concessions is projected to grow as a proportion of GDP and exceed that of Age Pension expenditure by around 2050, primarily due to earnings tax concessions.
  • Retirement income projections, greater use of longevity risk management products, guidance from superannuation funds, as well as accessible and affordable advice at retirement, would help people achieve better outcomes in retirement.

Hopefully, the Review will provide the necessary fact base to inform consumers, policymakers and industry participant on the way forward for the Australian retirement income system.

As an evidence-based researcher of long-standing, it has been a great privilege to be involved.

Published on 8 Dec 2020