Australia’s retirement income system is built on three pillars:
- taxpayer funded age pension – which is targeted towards people with low retirement incomes through both income and assets tests
- compulsory superannuation – which mandates a proportion of people’s wages is set aside for retirement
- voluntary private savings – which provides each Australian the flexibility to determine how much they want to save for their retirement in addition to the support provided by the age pension and/or superannuation.
The retirement income system has evolved through a combination of planned reform and an accumulation of ad hoc decisions. This has led to a complex system that does not always operate in
a coherent manner.
Australia’s retirement income system must have a clear purpose, and it should be well communicated and understood by the public. This can help to limit ad hoc policy changes to the system, while improving confidence in the system and the ability to plan for retirement.