A perfect storm for retirees and the critical moment for advice

Twelve months ago, I wrote in FS Super about the importance of trust and stability in Australia's retirement system.

One year on, that need has only become more pressing. Shifting policy settings, rising living costs, and global conflict and instability have combined to create something close to a perfect storm for Australians approaching retirement. For financial advisers, this represents both an enormous responsibility and an extraordinary opportunity.

The cost of constant change

Most of the policy changes debated in Canberra will never directly affect the majority of retirees. Yet, their cumulative effect on confidence is felt far more widely.

The Division 296 tax on earnings on large superannuation balances for example, first announced in 2023, finally passed Parliament in March 2026 and took effect on July 1 this year. The version that became law looks markedly different from the original.

The proposal to tax unrealised gains was abandoned, the $3 million total super balance threshold is now indexed and a new tax tier applies to earnings on total super balances above $10 million. The fact that the policy changed is not the issue, as many of those changes were welcome; the core issue is that Australians spent three years planning around a moving target.

Relatively few Australians will ever pay this tax. Yet, the debate was rarely out of the headlines, and many people it would never touch were left wondering: if the rules can change for some, what might change for me?

That is the hidden cost of a system in perpetual motion. For people about to rely on their savings for decades to come, it is not the detail of any single reform that unsettles them, but the sense that nothing can be assumed to be settled.

A harder economic backdrop

Policy uncertainty is challenging enough on its own. But it is not the only wind of change that has hit us in recent times.

The Reserve Bank lifted the cash rate four times this year, to 4.60% with the last rate rise in September. It has also signaled that it is prepared to go further if required. Headline inflation reached 4.3% in the year to September, with higher energy costs contributing to renewed cost-of-living pressures. For retirees on fixed incomes, these are not abstract figures. They are the costs of the weekly shop, the power bill and the drive to see the grandchildren.

Adding to these pressures is the continuing conflict in the Middle East. Disruption to oil flows through the Strait of Hormuz, which normally carries around 20% of global oil consumption, has contributed to what the International Energy Agency has described as "...the largest supply disruption in the history of the global oil market." Global energy markets remain exposed to further developments in the conflict.

The pressure is not unique to Australia. Across the developed world, the burden of retirement security is shifting from systems to individuals.

A generation at the threshold

Into this environment steps one of the largest retirement cohorts in Australia's history. Australian Bureau of Statistics data shows almost 300,000 Australians intend to retire within the next two years, and more than 800,000 within five.

A further 1.9 million don't yet know when they will stop working. Treasury expects the number of people drawing a retirement income from super to grow from 1.6 million to 2.5 million within a decade.

These Australians are making some of the most consequential financial decisions of their lives: when to stop work, how to draw an income, how to structure what they leave behind - at precisely the moment the rules governing those decisions are less certain.

Many are also making the shift from building wealth to living on it, which brings a different set of risks: outliving their savings, a market fall early in retirement, and inflation steadily eroding the value of their income.

What retirees actually want

Yet what people want from retirement is remarkably simple. They want certainty. They want to enjoy the retirement they have worked hard for, with an income they can rely on and the confidence that they won't outlive their savings.

The ABS finds financial security is the single biggest factor in deciding when to retire. The Retirement Income Review found most retirees die with the bulk of their wealth at retirement intact, as industry suggests that retirees live more frugally than they need to, for fear of running short.

That is the paradox at the heart of retirement in Australia: a world-class savings system, and a generation of retirees too uncertain to fully enjoy what it has delivered.

Why this is an important moment for advice

This is where advice earns its place. Government cannot promise that the rules will stop changing. Markets cannot promise calm. But a good adviser can offer something just as valuable: a plan that anticipates change, a structure that can flex as the rules evolve, and the reassurance that someone is watching on their client's behalf.

The need has never been greater, and the supply of advice has rarely been tighter. ASIC's Financial Advisers Register lists around 15,000 advisers - down by more than a third since 2018 - at the very time that hundreds of thousands of Australians are preparing to retire.

Importantly, the value of advice in this environment is not only technical. Retirement is an emotional transition as much as a financial one, signalling a change in identity, routine and purpose. The advisers who thrive in the years ahead will be those who understand how their clients feel, not just what they hold.

Empathy, clear explanation and steady guidance are what turn uncertainty into confidence.

Understanding the retiree mindset

That is why Generation Life has commissioned new research into the behavioural side of retirement: how Australians approaching this transition are really feeling, what concerns them most, and what would help them retire with a greater sense of wellbeing. We look forward to sharing those findings with the advice community in the coming months.

The rules will keep changing, and the storms may not ease soon. But for advisers prepared to meet clients where they are at - financially and emotionally - there has never been a better time to make a lasting difference.