Defined-Contribution Plans Australia 2025: Latest Updates & Insights

Defined-contribution plans have become the foundation of retirement savings for millions of Australians. With the 2025 landscape introducing new regulatory tweaks, employer obligations, and investment trends, it’s never been more important to understand how these plans work—and how to make the most of them.

What Is a Defined-Contribution Plan?

At their core, defined-contribution (DC) plans are superannuation accounts where the amount you accumulate depends on how much you and your employer contribute, plus investment returns. Unlike defined-benefit schemes, which guarantee a fixed income in retirement, DC plans shift investment risk and reward onto the individual.

• Superannuation Guarantee: In 2025, employers must contribute at least 12% of your ordinary time earnings to your super fund.

• Voluntary Contributions: You can boost your balance through salary sacrifice or after-tax contributions, subject to annual caps.

• Investment Choice: Most funds offer a range of investment options, from conservative to high-growth portfolios.

This structure means your final retirement balance depends on market performance, fees, and how much you (and your employer) contribute over time.

2025 Policy Updates: What’s Changed?

The Australian government continues to fine-tune superannuation policy. Here’s what’s new for defined-contribution plans in 2025:

• Increased Contribution Caps: The concessional (pre-tax) contribution cap is now $30,000 per year, up from $27,500. Non-concessional (after-tax) caps have also increased to $120,000 annually.

• Super Fund Stapling Expansion: Employees changing jobs will retain their existing super fund unless they actively choose a new one, reducing duplicate accounts and fees.

• Performance Test Expansion: The annual APRA performance test now covers a broader range of super products, helping members avoid persistently underperforming funds.

• Retirement Income Covenant: Funds are required to offer guidance and products designed to turn super balances into sustainable retirement income streams.

These changes are designed to help Australians grow their super more efficiently, minimise fee erosion, and avoid poor-performing funds as they build towards retirement.

Maximising Your Defined-Contribution Plan: Strategies for 2025

With the rules shifting, how can you make your defined-contribution plan work harder for you?

• Review Your Fund’s Performance: Use the latest APRA test results and YourSuper comparison tools to ensure your fund is top-tier.

• Contribute More When You Can: Take advantage of higher contribution caps, especially if you’re approaching retirement and want to catch up on your super.

• Optimise Your Investment Mix: Revisit your investment strategy regularly, particularly if market conditions or your risk appetite change. Younger Australians may benefit from higher-growth options, while those nearing retirement may prefer stability.

• Consolidate Accounts: Avoid multiple super accounts to reduce fees and simplify your portfolio.

• Plan Your Retirement Income: Talk to your fund about new retirement income products, such as annuities or account-based pensions, that comply with the Retirement Income Covenant.

Real-world example: Consider Emma, 45, who increased her salary-sacrifice contributions after a pay rise. Thanks to higher concessional caps and her fund’s strong performance, she’s projected to add an extra $80,000 to her retirement balance over the next decade. Meanwhile, John, 62, moved some of his super into a lower-risk option to protect his nest egg as he approaches retirement.

Looking Ahead: The Future of Defined-Contribution Super in Australia

With Australians living longer and relying more on their own retirement savings, defined-contribution plans are set to remain the nation’s primary wealth-building vehicle for retirement. Ongoing government reforms, greater transparency, and new retirement income products mean these plans will keep evolving. Staying informed—and proactive—can make a significant difference in your retirement lifestyle.