Actuaries Institute president Daniel Smith said the Institute would like to see an increase in the selection of retirement income products available to retirees and a reduction in the “current impediments to product innovation”.
“The current limited range of income products that pool longevity risk, including the unavailability of pure longevity protection in the form of a deferred lifetime annuity (DLA) and other innovative guaranteed retirement income products is a major consumer issue,” said Mr Smith.
He said this is particularly important for the growing number of baby boomers retiring each year.
“The baby boom generation started to reach age 65 in 2011 and over the next 15 years more than 4 million more baby boomers are expected to reach age 65,” he said.
“An increased choice of income products that pool longevity risk would allow consumers to choose products that best suit their needs in retirement.”
Mr Smith said there are a number of “well documented legislative and taxation barriers to innovation in the annuities market”.
“We suggest that the drafting should be in broad term rather than linked to the characteristics of specific products.”
The government also needs to introduce greater incentives for individuals to take the majority of retirement benefits as an income stream, said Mr Smith.
“Currently there is not tax payable on lump sums drawn from superannuation funds for members aged 60 and over, although there are some tax incentives for assets to remain invested in the superannuation system in retirement,” he said.
“There is therefore potential for people to draw all of their retirement funds at the earliest opportunity, spend these savings and then fall back on the age pension.”
He also said the government needs to continue to link the age pension eligibility age to improvements in life expectancy and include post-retirement solutions with intelligent defaults into the MySuper regime.
The Actuaries Institute also argued that impediments discouraging older workers who want to work need to be removed.
“In particular, encourage workforce participation by changing the means test, and consider introducing an increased age pension or a lump sum payment for people who continue to work past the age pension age,” said Mr Smith.
