The current minimum drawdown rate for people under 65 is 4 per cent, 5 per cent for those aged 65-74 and then steadily higher for older retirees.
Treasury’s Retirement Income Streams Review, released on 3 May, has endorsed the current rules while recommending they be regularly reviewed by the Australian Government Actuary.
However, a report by Morningstar released on 29 January 2016 argued that Australian retirees can only afford to withdraw 2.5 per cent of their allocated pension each year if they want to be certain it will last for 30 years.
The Morningstar report, titled Safe Withdrawal Rates for Australian Retirees, argued that the ‘4 per cent rule’ popularised by US financial planner William Bengen in 1994 should be rethought.
Speaking in January, Morningstar managing director for research strategy in Asia Pacific, Anthony Serhan, said the Turnbull government should review minimum withdrawal rates.
This week’s Treasury report said that the current minimum drawdown amounts are “consistent with the objective of the superannuation system to provide income in retirement and should be maintained”.
“The Australian Government Actuary should be asked to undertake a review of the annual minimum drawdown rates every five years and advise the Government to ensure that they remain appropriate in light of any increases in life expectancy,” said the report.
“Any other changes to the minimum drawdown amounts should only be considered in the event of significant economic shocks and based on further advice from the Australian Government Actuary.”
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