New global research has highlighted Australia’s mixed performance relative to global peers on converting retirement savings into income.
Australia’s retirement system has been placed in the middle of the global pack when compared with 10 other nations on how effectively savings are converted into income, according to international analysis from the TIAA Institute.
The report found that while Australia combines a mandatory superannuation system with broad Age Pension coverage, it still allows retirees extensive discretion over how they withdraw their super, setting it apart from countries that either mandate or tightly integrate the move from savings to income.
In contrast, the Netherlands, Sweden and Singapore require savings to be converted into income streams, resulting in far higher levels of annuitisation.
The study noted that many Australian retirees are “lost when it comes to managing their super”, with some drawing down too quickly to qualify for the Age Pension and others underspending due to uncertainty about how to make their savings last.
This contrasted with integrated systems such as Switzerland and Chile, where annuity options are embedded into the retirement process and annuitisation rates are consequently much higher.
Australia’s system was also highlighted for its unusual reliance on a means-tested public pension.
While 69 per cent of over-70s receive the Age Pension, retirees must first draw down their super to specific levels before qualifying, making the system difficult to model and meaning Australia’s replacement rate is likely understated in international comparisons.
Treasury estimates place the true replacement rate closer to 60 to 70 per cent, equating to a contribution effort of around 21 per cent once the Age Pension cost is considered.
Unlike nations with mandatory or default annuitisation, Australia sits at the “voluntary” end of the spectrum.
The report observed that when annuity purchase requires initiative from retirees, uptake is consistently very low. By contrast, countries where annuities form part of the default pathway—such as the Netherlands, Sweden and Switzerland—achieve far greater conversion of balances into lifelong income.
The report also identified that Australia, the UK and several other “individual choice” systems have been slower to integrate retirement income products into workplace plans.
Although Australia has introduced the Retirement Income Covenant and some funds have begun offering lifetime income products, adoption remains limited and the overall system continues to emphasise flexibility rather than guaranteed income.
In terms of broader system design, Australia shared features with countries that offer participants considerable control over investment and withdrawal decisions.
This approach, the report said, tends to create wide variation in member outcomes compared with collective systems such as the Netherlands and Switzerland, where contributions, investments and retirement income structures are more standardised.
The research concluded that countries with the highest replacement rates, including the Netherlands and Sweden, also have the highest contribution rates.
It suggested there is “no free lunch” in achieving adequacy, an observation relevant for Australia as debates continue over defaults, retirement products and whether more structured income pathways should be introduced.
Overall, Australia was assessed as a hybrid system with strong accumulation settings but weaker integration of retirement-phase choices.
The report indicated that future reforms may hinge on whether policymakers seek to shift Australia closer to countries that automatically convert savings into income or continue emphasising retiree discretion despite the behavioural challenges this creates.
