A key policy shift in Australia’s retirement savings system will take effect from July 1, as the compulsory superannuation guarantee rate rises from 11.5% to 12%. The adjustment is expected to significantly impact long-term financial outcomes for working Australians, particularly younger employees.
The rate increase marks the final stage in a multi-year legislative plan aimed at strengthening retirement security. By boosting the amount employers must contribute to employee super funds, the change is positioned to deliver higher projected balances for future retirees.
Projected Retirement Savings Could Exceed $600,000
New research from the Association of Superannuation Funds of Australia (ASFA) estimates that a 30-year-old worker earning the median salary of $75,000 and holding a current super balance of $30,000 could reach $610,000 in retirement savings by age 67, measured in today’s dollars.
This figure stands in stark contrast to current outcomes. ASFA reports that the median super balance for Australians aged 60 to 64 is $205,000 for men and $154,000 for women. The disparity is attributed in part to lower compulsory contribution rates in previous decades and more fragmented work patterns, particularly for women.
Younger Australians Demonstrate Strong Support for Reform
Contrary to perceptions that superannuation is not a priority for younger demographics, ASFA’s findings suggest significant engagement among workers aged 18 to 34. In a recent survey, 77% of respondents in that age group agreed the compulsory contribution rate should be at least 12%. Additionally, 82% stated that regular super contributions helped them feel more confident about their financial future.
ASFA CEO Mary Delahunty emphasized the importance of this sentiment: “This result demonstrates that younger Australians are engaged with superannuation and well aware of its positive contribution in shaping their financial security in retirement.”
A reminder that superannuation contributions increase to 12% from 1st July 2025.
— Marko Matvikov (@MMatvikov) May 29, 2025
This won’t be offset by any tax cuts, so it means less take home pay for millions of working Aussies.
It’ll make it that little bit harder for first homebuyers to save up for a deposit and stamp…
Definitions of a ‘Comfortable Retirement’ Remain Debated
While the contribution increase is expected to benefit many, expert views differ on how much is needed to retire comfortably. According to ASFA, a single person requires around $595,000, while a couple needs $690,000 in superannuation to support a comfortable retirement lifestyle. These estimates assume retirees will draw down all of their capital and receive a part Age Pension.
In contrast, Super Consumers Australia, a separate advocacy group, suggests lower targets. Its analysis finds that a single person may need $310,000, and a couple $420,000, under more modest lifestyle assumptions. These discrepancies reflect broader debates over cost-of-living assumptions and access to public benefits.
New Rate Not a Standalone Solution to Retirement Adequacy
ASFA noted that the 12% contribution rate, while beneficial, does not on its own guarantee sufficient retirement income for future generations. Factors such as wage growth, employment continuity, fees, investment returns, and life expectancy will continue to shape retirement readiness.
The rate increase is part of Australia’s long-term strategy to ensure that compulsory savings mechanisms remain effective and aligned with demographic and economic shifts. The government has not indicated further scheduled increases beyond July’s adjustment.
