The 2015 Intergenerational Report found that Australia’s aged dependency ratio (the number of people over 65 for every working-age person 15 to 64) is expected to double over the next 40 years.

This means there will be fewer taxpayers supporting a growing demand for pensions and services, including health and aged care.

In addition, the rate of home ownership is continuing to decline among young Australians, suggesting more people will face the ongoing costs of renting once they retire.

The superannuation guarantee was introduced 27 years ago with the aim of reducing reliance on the age pension and providing older Australians with an income in retirement.

The most frequently cited reason for this shift is demographic change (i.e. the rising proportion of older Australians and their increased longevity), which it is argued makes the cost of the government-funded age pension unsustainable.

While such claims relating to cost are debatable, it is undisputed that Australians are living longer. In the past 100 years, the life expectancy of Australians has increased by 20 years. At present, Australia has 3700 people aged over 100.

By 2050, Australia will have more than 50,000 people aged 100 years and over.

Australia’s existing retirement income system is based on three pillars: the Age Pension, compulsory superannuation and voluntary savings. While the recently released final report of the independent Retirement Income Review concludes that the existing system is effective and its costs are broadly sustainable, it also notes more could be done to improve financial literacy rates. The final report suggests that the system would benefit from clear objectives to guide future policies and assessment of such policies.

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