How does super and pension work in Australia?

Current state of retirement

Over the past five years, the average retirement age for Australian males was 63.6 years and for women 62.1 years. According to the Australian Bureau of Statistics, the pension was the primary income source for most retirees, showing that little additional planning had been done for their golden years.

9 out of 10 Australians experience a dramatic drop in their standard of living in retirement.

Australia has one of the highest life expectancies globally, with men on average living to 80.4 years and 84.6 years for women. This means we have approximately 20 years to live after retirement. But with many of us living longer, you might need your finances to carry you for the best part of three decades.

Only 12% of Australians have no financial concerns looking ahead to retirement. *source: Smart co: The future of global retirement report.

Research also shows that women, on average, retire sooner than men. This is alarming when you consider that women, on average, live longer than men but have also spent longer out of the workforce due to family commitments, limiting their ability to boost their savings. Women, in particular, should be looking at alternate ways to secure their financial future.

Australian retirement system: superannuation and age pension

The Australian retirement system has two main elements: The age pension and superannuation.

Age pension

The age pension is a subsidy provided by the government to cover the basic living expenses of Australian residents.

At present, the minimum age of receiving the age pension is 65.5 years, regardless of gender. This age will gradually increase and likely reach 70 by July 2035 and 75 by 2041. Once legislation is passed, Australia will have the highest retirement age of any country globally.

The full age pension is approx. $23,000 per annum for singles, and couples can receive up to $35,000 per annum.

To qualify for the pension, you must meet specific eligibility criteria, including income and assets assessment.

  • Age Pension Eligibility Criteria

– Must be at least 66.5 years old

– Must be an Australian resident for at least ten years in total and at least five years with no break in residence

– Income and assets are below the defined threshold

What is the income and assets threshold, you may ask? The threshold is based on if you are single or a couple and if you are a homeowner or not.

  • Singles

– Annual income cannot exceed approx. $4,400.

– Non-homeowners – assets cannot exceed approx. $460,000.

– Homeowners – other assets cannot exceed approx. $250,000.

  • Couples

– Annual income cannot exceed approx. $7,800.

– Non-homeowners – assets cannot exceed approx. $580,000.

– Homeowners – other assets cannot exceed approx. $380,000.

If your income and assets exceed the thresholds, you may be eligible to receive the part age pension, which is a smaller portion of the full age pension.


Superannuation is financial contributions made for you from an employer. You can also voluntarily deposit extra money into your super fund account to boost your superannuation savings.

If you are 18 years old or over and paid $450 or more (before tax) per month, your employer must pay at least 9.5% of your ordinary earnings to your selected super fund account. This percentage will gradually increase to 12% by July 2025. If you are self-employed as a sole trader or in a partnership, you do not have to pay super but can choose to pay contributions for yourself.

Data from the Association of Superannuation Funds of Australia (ASFA) shows that approximately 20% of self-employed people have no super at all.

Super funds manage and invest super for you and charge you management fees for this service. When choosing a superannuation fund, consider that the fee structures, investment portfolios and the return on investment may also differ substantially so it’s worth doing your research.

  • Receiving super is not the same as the age pension

– When you turn 65, you can receive super regardless of whether you are retired.

– You can receive it either as a pension or a lump-sum withdrawal.

How much super do I need to retire?

The million-dollar question. Considering that the Association of Superannuation Funds of Australia (ASFA)’s 2021 report ‘Rethinking Retirement’ indicated that the impact of COVID-19 has reduced the superannuation savings of many, retirement planning must take priority. Especially when the average retirement period in Australia is 23 years, and it is estimated that on average, savings and investments dry up after just ten years, leaving a 13-year gap.

To gain a clearer understanding, for 65-year-old Australian retirees to have a relatively comfortable retirement, they will need:


An income of $44,000 per annum or $880,000 over 20 years. *Based on retirees who own their own home.


An income of $60,000 per annum or $1,200,000 over 20 years. *Based on retirees who own their own home.

The average super balance at retirement is $271,000 for men and $157,000 for women, and the maximum age pension per annum for singles is $23,000 and for couples $35,000. Based on this, your super and age pension combined cannot support 20 years of retirement.

There has been multiple research methodology and data done on these figures, and all key reports come to the same conclusion: retirement funding is insufficient.

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