A recent report from the Super Members Council (SMC) has raised a major red flag for the retirement system. It estimates that around 700,000 Australians over age 65 are still holding their superannuation in the accumulation phase and paying tax on earnings — even though they may be eligible to move part or all of their balance into a tax-free pension phase.
The research suggests that the impact can be significant. Modelling by the SMC indicates that retirees in this position could be missing out on around $6,500 per year in potential income, adding up to roughly $136,000 over the course of retirement. These figures aren’t guaranteed losses for everyone — they’re estimates based on typical super balances and projected earnings — but they highlight just how costly system complexity can be.
This isn’t just a retiree issue. It’s a broader structural warning: the system is confusing, and it doesn’t automatically protect Australians who’ve spent decades saving under the assumption that super “just works.”
What’s going wrong
Even after you stop working full-time, your super doesn’t automatically switch to the tax-free pension phase. Unless you tell your fund you’ve retired (or reached the relevant age) and request the change, your money stays in accumulation phase where investment earnings are taxed at up to 15 per cent. Many people simply don’t realise they need to act.
The SMC calls this part of a growing “silver tsunami” — 2.8 million Australians expected to retire in the next decade — and says the system needs urgent reform to make the process clearer and fairer.
Why every Australian should care
If you’re working today and building super, the same system will apply to you. How your account is structured when you retire will determine how much of your money you actually keep. Assuming that everything becomes tax-free at 65 is a common — and expensive — misunderstanding.
Even if retirement is decades away, understanding how super phases work gives you more control later. For those with self-managed super funds (SMSFs) or more complex setups, knowing when and how to transition between phases is critical to avoiding unnecessary tax.
Big Super vs SMSF — the difference in how you’re looked after
This is where the divide becomes clear. Large retail and industry super funds manage millions of members. They’re efficient, but they operate at a distance — through systems, forms and call centres. They’re not required to proactively tell you when to switch phases, and they can’t offer personalised advice unless you pay extra for it.
By contrast, at SMSF specialist firms like Freedom Financial Partners, we work directly with clients who want to stay in control. Our accountants and SMSF specialists know your structure, your timing and your goals. We stay in regular contact, reviewing contributions, tax positions and transition points so your super works the way it should. In short, we don’t leave you to navigate the fine print alone.
What you can do now
Check your super account phase. If you’re nearing 60 or older, retired or nearing retirement, ask whether your balance is in accumulation or pension phase — and what that means for tax on earnings.
Understand when you can switch. The transition usually requires notifying your fund that you’ve retired or met the eligibility conditions.
Think about your long-term structure. If you’re considering an SMSF or already have one, make sure your plan covers how and when to move between phases, your draw-down strategy and your estate planning.
Stay informed. The SMC and other industry bodies are calling for simpler, more automatic systems and better access to advice — but change takes time.
Why we’re raising this now
We see this gap every day. Super isn’t just about saving — it’s about structure. The way your fund is managed determines how much you keep, how flexible your income can be and how easily you can pass on wealth to your family.
The SMC report highlights a widespread issue that could cost retirees thousands of dollars simply because the system is too complex. Whether you’re years away from retirement or already there, take the time to check your setup and understand how the rules apply to you. Big Super might not tell you when it’s time to make a change — but we will.
Structure matters, and getting it right early makes all the difference. Book in with us now if you’d like to check yours.