The Actuaries Institute has welcomed changes to Australia’s post-retirement superannuation system that it hopes will lead to improved living standards for retirees.
The legislation, which passed through parliament last week, deals with the risk retirees may outlive their retirement savings and gives older Australians more financial options in retirement by making changes to the means test rules that will encourage the development of new financial products for retirees. The package of changes also included an expanded Pension Loans Scheme and an increase in the Pension Work Bonus.
“The legislation will help stimulate the development of products that will underpin the government’s objective that superannuation provide income in retirement that supplements or substitutes the Age Pension,” said Andrew Boal, convenor of the Actuaries Institute’s retirement strategy group.
“We support the changes, and also support the principle of requiring superannuation funds to offer a retirement income product to members,” Mr Boal said.
Australians enjoy among the longest life expectancy in the world, a trend likely to continue.
However, retirees are currently offered slim guidance or choice when they take their retirement savings out of the superannuation system. Many worry that they will outlive their money.
“Since the early 1970s, the life expectancy of the average 65 year old has increased from around 12 years to 20 years for men and about 22 years for women,” Mr Boal said.
“But longevity is not uniform, it varies considerably from person to person, so some form of longevity protection will be helpful for many Australians.”
Mr Boal said the Actuaries Institute has been concerned for some time that the retirement phase of the superannuation system was underdeveloped.
“We support the progress that has been made to remove barriers to the introduction of pooled lifetime income products, and we welcome the clarification of the treatment of comprehensive income products in retirement (CIPRs) under the new Age Pension means test rules,” he said.
“We also support the government’s plans to prioritise the development of a retirement income covenant, and that all superannuation funds should develop a retirement income strategy for members.”
Mr Boal said income needs and spending patterns in retirement can and do vary significantly and there is no one-size-fits-all solution.
“We strongly support the notion that trustees should consider eligibility for the Age Pension when considering a member’s income in retirement, and also how cognitive decline may affect outcomes.”
What do you think of the government’s changes to lifetime retirement income products? Will it improve your living standards in retirement?