The 2026 Intergenerational Report looks 40 years ahead at how Australia will pay for an ageing population. One of its clearest messages is about retirement income. As the super system matures, more of your retirement will be funded by your own savings and less by the Age Pension.
Know where retirement income comes from
Australians generally fund their retirement from three sources:
- the compulsory Superannuation Guarantee paid by employers
- the Age Pension
- voluntary savings.
The Government supports this system by paying the Age Pension and offering tax concessions on super. Together these cost about 4.5% of GDP. The report expects that cost to stay fairly stable over the long term, even as the population ages.
Expect fewer people on a full Age Pension
In 2025-26, 61% of Australians aged 67 and over received the Age Pension. Another 5% received some other government pension or income support payment, such as the Disability Support Pension or Carer Payment.
The share of older Australians receiving a government pension or income support payment is projected to fall from 66% to 52% by 2065-66. Of those who do receive a pension, more than 70% are expected to be on a part rate.
The reason is that future retirees will have received the Superannuation Guarantee for most or all of their working lives, so they will retire with more in super.
As a result, spending on the Age and Service Pensions is expected to fall from 2.3% of GDP to 1.8% by 2065-66, even though the number of people of Age Pension age is projected to double to around 9 million. By 2060, Australia is projected to have the lowest public pension spending in the OECD as a share of GDP.
Growing importance of super to provide an income in retirement
Drawing on super will become a much bigger part of retirement income. Super drawdowns are projected to grow from 2.5% of GDP in 2025-26 to 5.8% in 2065-66.
The share of people with a super account in retirement phase is expected to more than double from 11.6% to 25.5%.
The report says a continued policy focus on helping people draw on their super effectively will lift living standards in retirement.
Watch the cost of super tax concessions
The cost of super tax concessions is projected to rise from around 1.7% of GDP to 2.7% by 2065-66, driven mainly by concessions on fund earnings. The report expects the revenue forgone on super concessions to overtake Age Pension spending in the late 2030s.
Reminder
A healthy super balance doesn’t rule out a part Age Pension. Speak with your adviser about a drawdown strategy that suits you and whether you may be eligible for a part or full Age Pension.
