Many super funds are still failing retirees, even as millions prepare to stop work

Too many superannuation funds are still failing to provide sufficient support to retirees, three years after being urged to lift standards, Australia’s top regulators have warned.

This failure to prepare comes despite the massive demographic wave of Australians already in or about to enter retirement.

A new report from the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) reveals the industry’s response has been slow, uneven and, in the regulators’ words, merely “incremental”.

The report shows a widening gap between the best and worst funds. For a growing number of Australians, this failure isn’t a future problem – it’s affecting their lives right now.

The retirement wave is here

The scale of the shift is breathtaking. More than 1.6 million Australians are already drawing a pension from their super, with another 2.5 million set to retire in the next decade.

With more than A$4.3 trillion in members’ savings invested across the super system, the 1.6 million retired members account for about $575 billion in assets.

Another statistic from the report is particularly staggering: one in five super funds already has half of its members in, or approaching, retirement.

Yet the review found many trustees are still designing services for people accumulating savings during their working lives, not those spending savings in retirement.

In October, ASIC raised concerns about “glaring” gaps in communications, saying funds were sending generic messages aimed at workers, with little tailored help for retirees.

Support for vulnerable groups, including First Nations members and those with low financial literacy, was largely absent.

The challenge is spending, not saving

For decades, the super system’s mantra was simple: save, save, save. The more complex challenge is helping people spend those savings confidently.

Without clear guidance, many retirees are understandably cautious. They withdraw too little, living more frugally than they need to.

Data shows fewer than half of pensioners draw down on their retirement savings, and more than 40% are net savers — turning Australia’s compulsory superannuation system into a massive inheritance scheme. Others spend too aggressively and face poverty later in life.

The regulators are clear: helping retirees spend appropriately is central to the purpose of the “retirement income covenant” introduced in 2022. The new laws aimed to provide an easier transition to retirement and to increase the range of retirement products.

But the latest review found one in five funds provide no guidance on drawdown strategies beyond the legal minimum, leaving members to make high-stakes decisions alone.

A lottery for retirees

The report highlights a dangerous divide. A small group of leading funds are making progress:

• offering better digital tools
• developing sophisticated retirement income products
• providing targeted guidance and advice.

But many others are lagging far behind, offering little more than basic calculators and generic information. The result is an inconsistency across the system, where a member’s experience depends entirely on which fund they belong to – the very inequity the covenant was designed to prevent.

Measuring busywork, not wellbeing

While almost every fund claims to have improved its understanding of members, few can demonstrate whether this has actually led to better outcomes for retirees.

The regulators said many funds still rely on “activity-based” metrics, such as website visits or webinar attendance. They are not measuring what truly matters: whether retirees have adequate and sustainable income, and whether they feel financially secure.

This distinction is critical. ASIC’s Moneysmart research shows only one-third of Australians approaching retirement feel confident they will be financially comfortable. In a compulsory super system, that widespread uncertainty is concerning.

What needs to happen now

The regulators have made it clear that funds must move faster. The covenant was never intended to be a compliance box-ticking exercise, but a fundamental shift towards improving members’ lives in retirement.

This requires a multi-layered transformation. First, funds must pivot from simply collecting data to actively using it to identify where members struggle and what support they genuinely need, moving beyond generic reports to personalised insights.

Second, communication must evolve into a lifelong conversation. Guidance can’t stop at the retirement date; it must be practical, tailored, and continue as members age. As ASIC has urged, this means developing relevant communications for people in their 70s and 80s, not just those on the cusp of retiring.

Ultimately, funds must shift their focus from measuring activity to measuring wellbeing. The true test of a fund’s strategy isn’t webinar attendance, but whether its members feel confident and have a sustainable income.

This outcomes-based approach must also be inclusive, ensuring support is accessible and effective for all members, including First Nations communities and other vulnerable groups who have been largely overlooked.

A system at a crossroads

Australia’s superannuation system is at a pivotal moment. It must transition from a wealth-accumulation machine to the nation’s retirement income provider.

Millions of Australians are now relying on their super fund to guide them through the most financially complex stage of their lives. The latest findings show that, three years after being put on notice, too many funds are not yet meeting that responsibility.

The message for the super industry is simple: supporting retirees is no longer a future priority. As the regulators have made clear, it is the immediate priority, and the time for incremental improvement is over.