An enduring myth is that a large proportion of Australian retirees rapidly spend their super savings and then rely on the age pension for all of their retirement income.

According to this myth, retirees have a strong preference for taking their super as a lump sum rather than a pension, or withdraw unsustainably large pensions each year for as long as their savings last.

It appears that the myth is based, in part, on a misinterpretation of government statistics of how fund members receive their super benefits upon retirement.

Another possible trigger for the myth is that there is no upper limit on the percent of superannuation pension assets that can be taken annually as a pension – although there is an age-based minimum.

Yet recent research suggests that retirees are typically concerned about outliving their savings and are cautious in their super drawdowns.

A recently-published research paper, How Australia Saves – a collaboration between Vanguard and Sunsuper – provides data that should further dispel the myth about free-spending retirees.

The research draws on the transactions and investment experiences of Sunsuper members, including the relatively small proportion who are currently in retirement.

Key findings regarding how Sunsuper members receive their retirement benefits include:

  • The median annual pension drawdown in 2015-16 was 6 per cent of a member’s pension assets.
  • Members who withdrew most or all of their super when eligible for retirement typically had extremely low balances. (The median drawdown of such members in 2015-16 was $10,000, representing 86 per cent of their super balances.)

The small percentage of Sunsuper members now receiving a retirement pension reflects its young member base; the median age being 36.

However, another 210,000 members are currently estimated to move into the retirement and pension phase over the next decade or so.

If you would like to discuss anything in this article, please call us on 9836 8399.


Written by Robin Bowerman, Head of Market Strategy and Communications at Vanguard.

Reproduced with permission of Vanguard Investments Australia Ltd

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