Finsia argued in its submission to the Financial System Inquiry that regulation will need to be adjusted to allow a wider range of income-orientated products incorporating greater pooling risk, along with debt products.
This includes products such as annuities, corporate bonds and long-dated government bonds, said Finsia.
The submission argued financial products and investment options are not being designed to account for the retirement needs of individuals.
“The financial services industry has an obligation to confront retirement sustainability and needs to develop financial products that assists in mitigating longevity risk,” said Finsia.
The submission argued a “regulatory and taxation level playing field across all financial products” could help achieve this.
Finsia also believes the industry has a responsibility in educating clients on retirement adequacy and changing the “mind set of investors from ‘lump-sum’ to ‘income replacement’".
The submission said this can be achieved by connecting with individual members and educating the population about “superannuation as a life financial goal”.
“Finsia supports the efforts of some financial institutions who have implemented IT systems that focus on member income-replacement in retirement,” said the submission.
“The superannuation industry needs to move from a silver bullet approach to one that takes greater care in calculating asset allocation, planning horizon, scenario testing and risk management to alleviate the asset-liability mismatch in retirement."
