Australia's superannuation system is at risk of disadvantaging vulnerable members, creating a gap between the legislated promise of dignity and the lived reality of retirement
Australia's superannuation system holds more than $4.3 trillion in retirement savings, making it one of the world's largest pension systems. As millions of baby boomers transition into retirement, the industry faces its greatest test: supporting potentially vulnerable members through the most complex financial decisions of their lives.
Yet cracks are appearing in the superannuation system's design and implementation, with regulators such as ASIC highlighting shortfalls in what is expected of superannuation funds and communication with members who may be more vulnerable.
These include victims of elder abuse or those suffering from cognitive decline, through to culturally diverse members or those who may be living in Indigenous or remote communities, according to UNSW Sydney experts who have studied structural gaps in the nation's retirement framework.
Redefining vulnerability in Australia's retirement system
The traditional understanding of vulnerability in superannuation is far too narrow, and retirement circumstances vary dramatically from individual to individual, said Katja Hanewald, Associate Professor in the School of Risk and Actuarial Studies at UNSW Business School.
"People differ widely in wealth, health, and family situations and must navigate complex decisions as they enter and move through retirement," explained A/Prof. Hanewald, who explained that this complexity extends beyond simple demographics.
Retirees, for example, need to coordinate superannuation with the Age Pension, aged care, or family transfers, while she noted that unexpected health shocks or cognitive decline can make these decisions exponentially harder.
Scott Donald, Associate Professor in the School of Private & Commercial Law at UNSW Law & Justice, also highlighted the vulnerability of superannuation fund members experiencing declining cognitive ability or practical autonomy.
Some lacked the ability to use the internet or access online banking services, which he said creates barriers to managing their retirement savings.
A/Prof. Donald identified other vulnerable groups that the system routinely overlooks. Significant categories included those working in the cash economy or casualised roles, or those living in Indigenous or remote communities.
"These are people for whom the superannuation system does not work," said A/Prof. Donald, who previously worked in the funds management industry advising governments, superannuation funds, insurance companies and fund managers on investment strategy, governance and regulation.
"It's neither designed in a way that really supports them, nor does the way it's been rolled out or the infrastructure in the system, the way the superannuation system actually works, help."
These overarching issues highlight the important concept of dignity in retirement, added A/Prof. Donald, who argues that dignity is about more than merely the amount of money you have when you retire.
The concept of dignity as avoiding humiliation proves especially relevant for vulnerable members. A/Prof. Donald warns that over-zealous imposition of default settings (perhaps justified on the basis of cognitive limitations older Australians may develop) could treat older members like children who can't be trusted to make their own decisions.
Regulators are concerned – and taking action
The concerns raised by A/Prof. Hanewald and A/Prof. Donald were recently highlighted by the Australian Securities and Investments Commission (ASIC), which released a report about retirement communications.
It revealed that some super funds, collectively responsible for millions of members' savings, lacked urgency in improving how they communicated with retirees, despite over 1.5 million members already in the retirement phase holding approximately $575 billion in assets.
ASIC Commissioner Simone Constant delivered a clear message to the industry, noting that only one-third of Australians approaching retirement felt confident about their financial future.
And with more than 2.5 million Australians set to enter retirement over the coming decade, the stakes are increasingly significant, according to Fei Huang, Associate Professor in the School of Risk and Actuarial Studies at UNSW Business School.
Her research into socio-economic longevity gaps exposed deep structural inequalities within the retirement system.
"At age 60, males in the least advantaged socio-economic groups on average live 11.5 years fewer, and females 9.1 years fewer than their most advantaged peers," revealed A/Prof. Huang.
These gaps closely correlate with area-level disadvantage, income, home ownership, and marital status, meaning members who are single, renting, on lower incomes, and living in disadvantaged areas face systematically shorter retirements despite contributing for decades.
This longevity inequality represents more than marginal differences; it constitutes a key indicator of vulnerability that should fundamentally inform how funds communicate with members and design retirement solutions.
Uniform pricing and product design, while appearing neutral, actually exacerbate inequality and undermine confidence in retirement income products, according to A/Prof. Huang, whose research focuses on responsible AI and data-driven decision-making, with particular emphasis on insurance, risk management, and actuarial applications.
"Funds should not assume that members are homogenous – financially literate, healthy, and equally long-lived. Our research shows this assumption can produce structurally unfair outcomes," she explained.
Where superannuation funds continue to fall short
A/Prof. Hanewald observed that some funds still rely on generic, product-focused messages timed around pre-retirement, rather than addressing the ongoing needs of already-retired members or those facing difficult personal circumstances.
