Spotlight on Australia - June 2026

Australia’s superannuation system is world-famous, at least among policy wonks and global fund managers! This is because of its overall size, currently at AUD 4.4 trillion in assets, which is the fourth-largest pool of retirement savings in the world. Further by 2030, it is expected to overtake the UK and Canada, with only the US ahead of it. It is also famous because of the amount it has reduced the current and future burden of Australia’s public pension, making Australia the envy of governments everywhere (see chart below).

So how did Australia’s superannuation system come to be and how does it work?

Forged in the fire of inflation

Australia introduced its Superannuation Guarantee Scheme in 1992. For the first time, Australian employers were required to contribute to the retirement savings of their workers. Minimum contributions started at 3% of gross salary and have risen over time to the current 12%.

Before 1992, most Australian retirees relied on their personal savings and the public pension. The public pension was introduced in 1908 and has always been means-tested.

A lucky few could also rely on private pensions (superannuation) or defined-benefit schemes provided by their employers. Over time, more people gained access to such schemes, but even by the 1970s, coverage was still not universal. In 1974, only 40.8% of male and 16.5% of female wage and salary earners had coverage. To make the inequity worse, superannuation has always enjoyed a preferential tax status.

Labour unions have typically been strong in Australia and in the 1970s there was a growing movement amount unions to expand the coverage of superannuation. Unions also saw it as a way of deferring wage increases to the future.

Like most of the world, Australia suffered from stagflation from the mid-1970s to the early 1980s, sparked by the OPEC oil shocks.

With the economy still suffering in 1983, the Australian Labor Party won the election and instituted a set of agreements with unions to combat stubborn inflation. These agreements were called the “Prices and Incomes Accords”. In return for accepting lower wage growth and commitments to increase labour productivity, unions were rewarded with long-sought-after benefits. This eventually included universal access to superannuation.

The Labour government and Treasury also saw superannuation as key to ensuring the stability of Australia’s pension system as Australia’s population aged. Without change, the public pension would have grown into a massive public funding burden, as it has in many countries around the world. This has since become the most cited benefit of Australia’s superannuation system.  

“As with all things, something on this scale requires imagination. It also requires conscientiousness and for leaders and ministers to take responsibility. We have already left most comparable countries well behind.” Paul Keating, federal treasurer from 1983 to 1991 and prime minister from 1991 to 1996.

The rapid growth of superannuation

The assets of Australia’s superannuation system have grown rapidly as the working-age population has increased, compulsory contributions by employers have increased over time to 12%, and returns have accrued. Today, total superannuation funds amount to around AUD 4.4 trillion. Deloitte expects this figure to reach 12 trillion by 2045 (see chart below).

How superannuation actually works

Every payday, Australian employers must make a contribution equal to 12% of a worker’s gross wage or salary to the superannuation fund of the worker’s choice. Workers can continue with the same fund even when they change employers. Employers and employees can also make additional contributions from pre-tax income. All these contributions incur a 15% tax, which is the lowest marginal tax rate. Australia’s highest marginal tax rates 45%. The tax rate increases if workers make contributions above a threshold amount. Earnings made from a superannuation fund before retirement also incur a 15% tax.

Superannuation funds invest contributions across a range of asset classes in Australia and overseas. The largest superannuation funds by assets are industry funds that were created by unions (see chart below). Self-Managed Super Funds are also an important and unique segment.

Large super funds are regulated by the Australian Prudential Regulatory Authority, which also regulates banks and insurance companies.

While the pension age is 67 years old, Australians can retire and get access to their superannuation at the preservation age, currently 60 years old.

When a worker retires, they can take their superannuation total as lump-sum payments, a private pension, or a combination of both. Workers can also transition to retirement and receive part of their superannuation. Withdrawals are generally tax-free. Early access to superannuation is possible on compassionate grounds, or because of severe financial hardship, or incapacity.

Upon reaching retirement age, a retiree may also be eligible to take a partial public pension depending on their total assets.

Most superannuation funds also provide life insurance for their members.

The average superannuation amount for men and women aged 60 to 64 is $413,700 and $327,400 respectively. It is estimated that most 67-year-old singles who own their own home will need $630,000 in superannuation to retire comfortably. Many Australians will thus need to supplement their superannuation with the public pension at some point during their retirement.

The benefits to the Australian economy

Superannuation has boosted the current savings of Australian households by an estimated AUD 500 billion. This is money that is available to Australian companies through the stock market, bonds, and even private equity. It also contributes to infrastructure projects. Over the decades, such contributions have increased Australia’s productivity and overall growth.

Superannuation also saves the government around 6.5% of GDP each year compared to the OECD average. In 2025, this equated to around AUD 181 billion. This helps explain why Australia’s general government debt is around half the OECD average (see chart below).

Final thoughts

Australia’s Superannuation Guarantee Scheme was born in a particular moment in time, but it remains a gift that keeps on giving to Australia, including its retirees, companies, and federal government. Superannuation provides the Australian economy with a resilient suit of armour and a spring in its step, which is missing in most other economies.