Welcome to the first edition of The Retirement Rubicon for 2026. We trust you enjoyed your end-of-year break, are refreshed and ready for the challenges ahead.
Before Payday Super, Division 296 and DBFO Tranche 2 consume your operational bandwidth, we thought it timely to look back at the retirement risks that did materialise during 2025, and what they tell us about the year ahead.
In early 2025 I published a LinkedIn piece titled “The Risks Retirees Face – 2025 Edition”, outlining 12 distinct risks to retirement security in addition to the three specified in the Retirement Income Covenant (namely longevity, investment and inflation).
With the benefit of hindsight, here's how it played out.
🔎 Retirement Risks that Manifested in 2025
As famed British economist Professor Elroy Dimson once stated: “Risk means more things can happen than will happen”. Which is to say that a matter identified as a risk may stay benign or dormant for the entirety of a period under consideration, or it might flare to make its presence felt on the downside.
The below risks were, in our opinion, firmly in the second camp during 2025.
Climate Risk
2025 is expected to rank globally as either the second or third warmest year on record, not far off the record set during 2024.
As noted in the LinkedIn piece last year, climate change presents risks to both financial and physical wellbeing for retirees.
Key impacts:
Property values: Flood risk now affects an estimated 1 in 6 properties. A recent Climate Council report values flood-exposed homes at $42.2 billion less than they would have been without the flood risk.
Insurance costs: The Actuaries Institute notes affordability-stressed households spend 9.6 weeks of gross income on insurance, seven times more than non-stressed households. Insurance may become increasingly expensive (and inaccessible) for retirees of more modest means.
Bushfire effects: Bushfires, as recently impacting parts of Victoria, impose significant financial costs not just on those directly impacted, but surrounding communities through lost employment, tourism and rental income.
Health risk: Severe heat events are estimated to cause ~3,000 deaths annually in Australia, with recent UQ research showing a 20% increase in heatwave related deaths due to climate change. Older Australians, particularly those of modest means, are increasingly vulnerable.
Cybersecurity Risk
While we wait for a 2025 update to the $320 million stolen in 2024, the evidence suggests those aged 65-plus are significantly more at risk from online scams and cybercrime, with $80 million taken from this cohort alone during 2024.
In the piece last year it was noted that the “rudimentary cybersecurity approach of many older Australians, combined with our high retirement balances (by global standards), makes superannuation a tempting target for international cybercriminals”. That temptation will only keep growing.
Key developments:
The March-April credential stuffing attacks across multiple super funds confirmed that the sector is increasingly in the crosshairs.
APRA's swift response reminded funds of their CPS 230 obligations, expressing concerns about “persistent weaknesses in RSE licensees’ information security controls, particularly those related to authentication” and allowing until 31 August 2025 for rectification of identified weakness.
AI-powered threats present new attack vectors, making cybersecurity a governance, risk and compliance (GRC) priority for 2026, particularly for pension phase interactions with external bank accounts.
Housing Tenure Risk
Australian residential property prices grew 8.6% during 2025, with implications for retirees on both sides of the ownership divide. The median dwelling value nationally now exceeds $900,000, according to Cotality.
Per our white paper last year, the aggregate value of residential housing, now north of $12 trillion, is the most significant form of wealth for the vast majority of Australian households, however many are now carrying substantial amounts of housing debt into retirement.
That, in turn, has left mortgaged retiree households exposed as rates have risen since 2022, with recent analysis suggesting that a new mortgage now consumes 45% of median household pre-tax income, compared to 26% in September 2020. With around 15% of 65-plus households still mortgaged, mortgage payment risk is a growing concern as the more indebted Gen X approach retirement.
In addition to the mortgaged, some 15% to 20% of retiree households (depending on age cohort) are experiencing retirement as non-homeowning renters. A 2025 study found their rates of financial stress to be up to twice that of equivalent homeowning retirees.
Management/Agency Risk
This risk took centre-stage in 2025 with the collapse of MIS master funds Shield and First Guardian, initially impacting some 12,000 APRA-regulated members (collectively over $1 billion) via retail super platforms.
We noted in our piece last year that management/agency risk exists because trust placed in a super fund or adviser “may not be repaid, either through poor management, a misalignment of interests or ineffectual governance”. All three appear to have been factors in the case of Shield and First Guardian.
What went wrong:
Sophisticated top-of-funnel lead generators (super comparator websites) operating with impunity
Affiliate marketing referrals to financial advisers with questionable compensation arrangements
MIS operators with sizable conflicts of interest as between fund assets and duties to end investors/unitholders
Lax due diligence by super fund platforms on investment governance
Four major entities were caught in the ensuing maelstrom. Macquarie and Netwealth have elected to settle matters with ASIC, while Diversa Trustees and Equity Trustees are choosing to contest the matter in court.
ASIC has been asked by the Minister for Financial Services to look at the requirements for MIS operators who interact with super funds, while APRA will monitor how platform-based super trustees are lifting governance standards.
It appears that the Compensation Scheme of Last Resort (CSLR) 2026/27 levy for financial advice may once again exceed the $120 million advice threshold, with Dr. Daniel Mulino apparently considering whether APRA-regulated profit-to-member funds should be included in entities contributing to a CSLR special levy for FY27.
💡What This Means
Interconnected Risks and Compounding Effects
A retiree doesn’t experience “climate risk” or “housing risk” in isolation — they experience stacks of risk. For example:
Housing + climate: mortgaged home in a flood/bushfire zone → rising premiums → shrinking disposable income
Cyber + low digital confidence: higher susceptibility to scams and account compromise (including super)
Governance + complexity: exposure to product/platform failures where due diligence breaks down
Retirement risk management is increasingly about understanding combinations of risks, not just individual exposures. A member who looks "fine" on one dimension may be fragile when multiple risks interact. And funds are obliged, under the RIC legislation, to address how to manage “any other risks to the sustainability and stability of the retirement income”1.
The Data Gap Problem
The risks that flared in 2025 share a common thread: they sit largely outside the traditional super fund member data envelope.
Funds typically know a member's age, balance, investment option and employment status. But the risks above: climate exposure, housing tenure, mortgage stress, digital vulnerability require data that most funds don't hold and, in many cases, have limited means to obtain.
The Actuaries Institute's recent Help, Guidance and Advice (HGA) paper explicitly names home ownership arrangements, partner status and external assets as critical data - noting trustees have only "a limited window on their members' financial affairs".
The 2025 risk events sharpen the point. A 67-year-old couple with $400,000 in super might be debt-free homeowners in a low-risk postcode, or mortgaged owners in a flood or bushfire prone area spending 15% of their retirement income on insurance. Account balance and age tell you little about which scenario applies.
A Middle Path: Cohort Analysis and "People Like You"
There is a practical middle ground between individual member data (with its attendant obligations) and flying blind.
The 2025 risk events suggest this framework could potentially be extended to factors like geographic exposure (flood, bushfire zones) and digital engagement levels, neither of which are currently standard cohorting factors, but both of which correlate with the risks that actually materialised.
Scenario-based tools can then help members self-identify: presenting "people like you" personas, and asking members to recognise those which apply to their circumstances.
Where the industry is now:
The 2025 APRA-ASIC Pulse Check noted some 75% of funds now segment members into cohorts (though many remain basic), anchored to age and balance.
Where it's heading:
The Pulse Check and Actuaries Institute both point toward more sophisticated segmentation: housing tenure, Age Pension eligibility, household composition.
DBFO Tranche 2A's "targeted superannuation prompts" represent a regulatory step in this direction, enabling funds to nudge members based on cohort characteristics without the interaction being deemed personal advice.
Building the capability:
The 2025 risk events suggest extending this framework to geographic exposure (flood, bushfire zones) and digital engagement levels - factors that correlate with the risks that actually materialised.
Scenario-based tools can help members self-identify, presenting "people like you" personas rather than requiring funds to collect sensitive individual data.
📊Quick Poll: What risks are you watching for 2026?
We’ve focused today on risks that sit outside the RIC's 'big three', but are increasingly shaping retirement outcomes. We're curious what you think.
If these are the kinds of questions your team is grappling with - cohort design, scenario tools, member personas or profiling, we'd welcome a conversation. Reach out at [email protected].
And that’s a wrap for the first edition for 2026. As always, we welcome your questions or feedback - simply reply to this email.
Found this valuable? Consider sharing it with your friends and colleagues.
— The Lumisara Team
1 per the Retirement Income Strategy requirements for RSEs as outlined in SISA Section 52AA(2)(b)(iv)