Retirement income: Australia taught a generation to save, not to spend

More than 250,000 Australians retire each year, and four decades of compulsory superannuation trained almost all of them in one skill: putting money in. The harder work starts the day the salary stops.

A balance has to become an income that survives a retirement which can run past 30 years. Very little in the accumulation system prepares anyone for that.

Challenger launched the Institute for Lifetime Income this week to work on the second half of the problem, describing it as an advocacy and insights platform for financial and longevity literacy.

What the Institute is for

The Institute gathers Challenger’s existing research, whitepapers and policy work under one banner, and adds an education hub aimed at pre-retirees, retirees and the industry that serves them.

Mandy Mannix, Challenger‘s principal advocate for retirement, frames it as the next stage of work the firm has done for years.

“Challenger has been a leading contributor for many years with research, whitepapers, and policy ideas about retirement in Australia,” Mannix says. “The launch of the Institute is the next step in bringing our experience and insight together to drive our next era of advocacy.”

The timing follows the demography. Challenger counts more than 250,000 Australians leaving work every year, a cohort it compares to the population of Wollongong.

“With longer life expectancies, it is not uncommon for people to now have more than 30 years in retirement, and it’s only going to increase,” Mannix says.

Three risks behind every drawdown conversation

The Institute organises its material around three risks, and advisers will recognise all of them from client meetings. Longevity risk asks how long the money must last. Sequencing risk asks what happens when markets fall in the first years of drawdown, with no new contributions arriving to average the loss away. Inflation risk asks what the income buys in year 20.

Each risk carries a different remedy, and clients rarely separate them on their own. A client who says they are afraid of running out of money is often describing sequencing risk. A client who wants to leave capital to the children is trading longevity cover for a bequest.

Working out which risk drives the anxiety changes what the adviser recommends, and diagnosis, more than product knowledge, is what better research can sharpen.

The regulators are working the same problem

Retirement literacy has become an industry project rather than a marketing exercise, and the regulators explain why. APRA and ASIC’s 2025 pulse check on the retirement income covenant counted about 1.5 million member accounts in the retirement phase, holding $575 billion between them.

Another 2.5 million Australians will retire over the next decade. The review criticised trustees for incremental progress. Some 77 per cent of trustees segment members into cohorts, yet only 36 per cent had delivered improvements aimed at members already retired.

The regulators also found that only around one-third of Australians approaching retirement feel confident they will be financially comfortable.

Mannix leans on Challenger’s own survey work to make a similar case. “We know from our annual Challenger Retirement Happiness Index that quality of life in retirement is underpinned by good health and confidence in wealth,” she says.

This year’s index scored retirement happiness at 69.5 among Australians aged 60 and over. Seventy-two per cent said they want certainty their money will last, and 61 per cent said financial education had improved their happiness.

“Better retirement outcomes won’t come from one organisation acting alone. They will come from bringing together research, lived experience, and thoughtful discussion.”

Where education stops working

Literacy moves understanding faster than it moves behaviour, and the covenant review shows the limits. Member engagement with advice services rose after the covenant commenced, while drawdown behaviour barely shifted. Retirees kept taking minimum payments and kept guarding capital they had spent 40 years accumulating.

Understanding longevity risk and acting on it are separate tasks, and only one of them responds to a research report.

Guaranteed income also carries a cost the education material tends to underplay. A client who buys certainty gives up flexibility and, in most structures, access to capital. Long bond yields on the day of purchase also set the income a lifetime product pays, so a client retiring into a low-rate year locks in less than one who retires after yields rise.

That timing risk turns the decision into an advice question rather than a product choice, and the adviser earns their fee on that judgement.

What advisers can use

The practical value of a platform like this comes down to vocabulary and evidence. An adviser explaining longevity risk to a 64-year-old needs figures that come from somewhere other than their own conviction, and research on spending patterns, life expectancy and drawdown behaviour gives the conversation a spine.

Challenger lists its own specialists behind the Institute, including head of retirement income research Aaron Minney, chief economist Jonathan Kearns and head of technical services Andrew Lowe.

Mannix argues the country has the harder part built already. “Australia is well placed to lead globally in retirement income because we’ve already built one of the world’s most mature retirement savings systems,” she says. “The next stage is ensuring people have the knowledge, confidence, and support to make the most of those savings throughout retirement.”

That next stage arrives whether the industry is ready or not. Three decades of compulsory contributions built a $4.4 trillion savings pool, and the next decade will judge the system on how well 2.5 million new retirees spend it.