HESTA wants retirement income stream default mechanism

Mike Taylor

Managing Editor and Publisher

17 February 2026

Yet another major industry fund has sought to ramp up pressure on the Federal Government to deliver the next tranche of the Delivering Better Financial Outcomes (DBFO) legislation to enable it to ‘nudge’ members towards retirement products.

Big health industry fund, HESTA wants the Superannuation Industry (Supervision) Act (SIS Act) to be amended “to enable funds to default eligible members into a retirement income stream (with opt out as an important consumer protection”.

In doing so, it released the results of research it commissioned from Laneway Analytics to claim that “Australian retirees are missing out on billions in retirement benefits by not transitioning their superannuation to retirement phase, where they could benefit from tax-free investment earnings”.

It said the research shows that in the 2025 financial year up to 1.8 million Australians collectively, and often unknowingly, missed out on an estimated $2.46 billion in additional investment earnings.

“Without reform, this figure is projected to rise to more than $5 billion annually by 2030, impacting an estimated 2.9 million Australians,” the fund said in its pre-Budget submission.

The submission said that the draft “DBFO Bill does not address the slow take-up of retirement products”.

“Reforms proposed in the UK would allow funds to direct certain disengaged cohorts to specific retirement journeys/products that would deliver better outcomes for them. We recommend a similar approach be applied in Australia, amending proposed DBFO reforms to allow targeted superannuation prompts”.

“Sensible consumer protections should be built in, for example, limiting prompts from accumulation to retirement to members who are in a MySuper product; and limiting prompts to specific cohorts for example, a combination of age and contribution inactivity.”

Outgoing HESTA chief executive, Debby Blakey said: “We’re calling for changes that would allow super funds to actively help eligible members transition to retirement products. This simple change could make a profound difference to Australians’ retirement outcomes.

“This isn’t just about individual retirees – it’s about Australia’s future. By enabling retirees to maximise their retirement income, we’re supporting we’re supporting more dignified retirements and helping to boost the economy.”

“The change advocated for by HESTA includes implementing ‘soft defaults’ that would automatically transition eligible members to retirement phase products at a certain age when they’re no longer making contributions. The proposal would maintain clear member opt-out options.”

“The research modelling shows that transitioning to retirement phase products could boost a member’s total retirement income by up to 12%, or as much as $99,000, compared to those who delay transitioning by four years.”