The drawdown or spending phase of superannuation is ripe for greater attention.
Retirees are accused of being too conservative with their spending, leading to calls for changes to superannuation drawdown rules.
According to Nick Callil, head of retirement solutions at insurance firm Willis Towers Watson, the Age Pension and related benefits need to be more closely integrated with compulsory and voluntary superannuation to deliver a better retirement income system.
“Often, there is an assumption (generally unspoken) that assets individuals have accumulated for retirement are not to be drawn down during the retirement years,” he said in his Superannuation is for Spending report.
The report suggests that superannuation funds are hindered from offering more tailored drawdown guidance due to concerns about regulatory constraints on providing advice and limited information available about retiree members.
“Living off the interest income from term deposits or the dividend income emanating from a share portfolio sounds attractive, but for most retirees (who have little in the way of income-producing assets outside superannuation) this sort of strategy is unlikely to produce an income they might regard as adequate,” Mr Callil said.
One of Mr Callil’s suggestions is for superannuation funds to provide estimates of projected retirement income during the accumulation phase (particularly as members approach retirement) to promote the primary aim of superannuation as spending in retirement.
Some superannuation funds do provide these estimates, but Mr Callil believes they should be mandatory.
He also suggests that super funds should review their default drawdown offerings to ensure they are not too conservative and do not promote inappropriately low spending by retirees. They should also improve and promote their longevity protection products to ensure retirees are sufficiently comfortable that they will not run out of money.
Do you only spend the money earned by your superannuation fund or do you draw down from the balance? How do you manage your retirement income? Do you think you are too conservative with your spending?
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