Several industry participants have labelled the federal budget a missed opportunity in addressing the longevity risk issue facing a large part of the Australian population.
The Institute of Actuaries of Australia was disappointed the government did not remove any barriers to allow the development of a new annuities market to tackle this issue.
Taking this action would mean new annuities products could be developed to satisfy the retirement income needs of individuals that also neutralised the threat of people outliving their savings, according to Institute chief executive Melinda Howes.
"Retirees need access to products that reduce the two major risks they face, market and longevity risk. Innovative annuity products are ideally suited to meet these objectives, however, a number of legislative impediments are limiting their development," Howes said.
However, she was complimentary about the initiative that gave the ability for age pensioners to participate in some work without impacting on their means tested status.
"We were pleased the federal government followed our recommendation and allowed older Australians to boost their standard of living in retirement by working part-time without jeopardising their pension income. From 1 July, age pensioners will be able to earn up to $250 per fortnight before their pension will be impacted by the means test," she explained.
Towers Watson was in agreement with the actuarial body, saying the government fell short of the mark regarding longevity risk.
"The improved work bonus is welcome, but there is nothing in this budget to address existing barriers to private sector innovation in the annuity market, nor anything to encourage individuals to continue to work (and save) to older ages," the financial services organisation said in its budget assessment.
Challenger retirement income chirman Jeremy Cooper said the extended relief on the minimum drawdowns for allocated pensions showed these products were now sadly lacking in their servicing of Australians' retirement needs.
"We need to improve them or replace them with products that don't leave retirees heavily exposed to market and longevity risk, " Cooper said.
