2026 IGR Through a Retirement Lens

Welcome to TRR #19 for 2026, where we focus the entire edition on the just-released 2026 Intergenerational Report (IGR), viewed through a retirement lens.

Treasury's 2026 IGR provides a 40-year narrative arc about Australia's ageing population and its retirement income system; one where a maturing super system takes pressure off the Age Pension and lifts retirement living standards for generations to come. We review the IGR’s take on population ageing and retirement through its own ‘3P’ lens of Population, Participation and Productivity.

In keeping with all previous IGRs, the latest version projects Australia’s demographic, economic and budgetary prospects 40 years forward through a ‘3P’ framework that encompasses longer-term trends in population growth, labour participation rates and economic productivity.

The 2026 IGR forecasts Australia's population to grow from the current 28 million to some 39.3 million by 2065–66, but at a slower 0.9% annual pace than the 2023 IGR assumed, driven by a lower fertility assumption of 1.34 children per woman.

The median age is forecast to rise from 38.6 to 45.0 years by 2062–63, while the old-age dependency ratio is predicted to reach 38.8 people 65-plus per 100 working-age people, up from 38.2 in the 2023 IGR. In the 2007 IGR that metric stood at 20.

The proportion of Australians aged 65-plus is projected to rise to almost 25% of the total population by 2065-66 (up from around 18% today), while the 85-plus cohort will account for some 10.5%. Life expectancy is expected to keep extending, to 86.1 years for men and 89.5 years for women by then.

Population ageing will gradually erode labour supply, but offsetting that, older Australians are working more than in the past. Participation rates among the 65-plus group has lifted around 9.5 percentage points since the 2002 IGR, aided by better health, changing retirement behaviour and policy incentives (such as the Pension Work Bonus), though this cohort remains more likely to work part-time.

Gains among women and older workers are expected to offset the drag from ageing in the earlier years of the projection, but ageing is still expected to reduce overall labour participation by the end of the 40-year horizon.

Health care and social assistance, already Australia's largest employing sector at ~16% of the workforce, is forecast to keep growing fastest as care demand builds, reinforcing the shift toward service-based employment. Health will continue to be the the single largest budgetary pressure point, reaching 6.2% of GDP by 2065-66.

Productivity is relevant to retirement outcomes because it determines the ‘cruising speed’ an economy can maintain, lifting working-life incomes without inflationary pressures.

An ageing population carries a modest productivity headwind of its own: measured productivity (proxied by wages) tends to decline in the years before retirement, so a larger share of older workers places gentle but persistent downward pressure on average hours worked, and so aggregate productivity growth. Which is not ideal when the productivity growth rates of the 1990s (which averaged ~2% p.a.) is a long-distant memory compared to the more recent sub-1% p.a. rate.

The 2026 IGR retains the previous edition’s forecast of productivity growth averaging 1.2% p.a. over the next 40 years, with expectations about the benefits of AI informing the view. As Age Pension benefit levels are linked to economy-wide AWOTE, productivity growth matters to longer-term retirement security.

The 2026 IGR tells a broadly positive story about superannuation in long-term aggregates, but less about the variability of individual retirement outcomes.

The IGR notes that “superannuation is the second largest source of wealth for Australian households and will play an increasingly important role in supporting income in retirement”, with the system having grown from around $148 billion in 1992 to some $4.8 trillion now. That is undeniably true, aggregate super trailing only net home equity, which now sits somewhere north of $10 trillion.

Median balances at retirement continue to grow with system maturity, rising from around $115,000 in 2014 (in nominal terms) for those aged 65-69 to some $204,000 today. Using Treasury’s MARIA model of household asset modelling, the IGR expects median balances for these near-retirees to approach $430,000 (in nominal dollars) by 2036-37.

Further, drawdowns from super are projected to increase to almost 6% of GDP by 2065–66 from the current 2%-plus mark, while Age Pension spending is expected to decline as a share of GDP to 1.8%.

According to the 2002 IGR, Age Pension and related payments to veterans and war widows accounted for 2.9% of GDP during 2001-02, a testament to the budgetary relief that modern superannuation has delivered since 1992. That said, we can’t afford to rest on our laurels, for aggregates can mask pressures building elsewhere within the retirement income system.

It is tempting to read the IGR as confirmation that the retirement system is on track, and so treat the hard work as largely done. We would caution against any such hubris.

The IGR's own numbers make the near-term case for urgency, not complacency. This isn't a retirement story that starts unfolding in the 2060s. The ‘silver tsunami’ is well and truly upon us. Over a million members 65-plus are drawing on their super holdings of roughly $575 billion, with a further 2.5 million expected to retire over the next decade.

Those are the members whose outcomes the IGR's long-run averages are quietly built upon, and they are now retiring into a system still not fully ready to provide them with the retirement income products, services and supports they need.

Take for example the Age Pension. While the headline projection is for its share of GDP to fall to 1.8% by 2065-66, the reality is that it still payable (in part or in full) to 2 in 3 qualifying retirees today. On a medium term view, per the chart below, around 6 in 10 retirees will still be reliant on the Age Pension in 20 years (albeit skewed more to part payment over the full rate).

The projected continued presence (and for some retirees, primacy) of the Age Pension is wholly consistent with Treasury’s medium term forecast of the median near-retiree nominal super balance of $430,000 in 2036-37, which would equate to some $300,000 in today’s dollars [discounted at the IGR long-run wage growth assumption]. $600,000-odd in accrued super for a median mortgage-free homeowning couple might indeed be sufficient for a secure retirement, or it may not, depending on the composition of the household balance sheet and housing situation.

The question trustees need to answer therefore is this: leaving aggregates aside, what does the composition of our fund membership look like for near-and-pre retirees, current and prospective? Is the IGR’s projected median retirement balance an accurate representative of our pre-retirees, given our membership characteristics on gender, income/SG, additional contributions and lump-sum withdrawal behaviour? And if not, what do the different pre-retiree member cohorts actually look like, how do they behave and what retirement planning needs may they have?

Trustees should therefore read IGR 2026 through the lens of their own memberships. The report’s comfortable 2065–66 projections are not a mandate to relax into the superannuation system’s design; they are contingent on trustees closing the known decumulation gaps for members who are retiring now. APRA and ASIC have made clear they intend to hold trustees to that standard on a much shorter timeframe than 40 years. Boards reading this IGR as validation of the status quo are reading the wrong horizon.

In all honesty, 2065-66 will not carry much KPI or OKR weight to us, the current crop of professionals, consultants, executives and trustees tasked with improving the superannuation system in furtherance of better member retirement outcomes.

We’ll likely be experiencing the retirement income system up close and very personally. The work to get the many, not just the few, to a dignified retirement is in the here and now. And there is no time to waste.