Speaking at a lunch in Sydney on Friday, UBS Global Asset Management head of investor strategy Tracey McNaughton said the impact of baby boomers entering retirement on the super system and government budgets “has not been fully appreciated”.
She said the crisis approaching the economy has only just begun, with the baby boomers first beginning to retire in 2011.
It will inevitably lead, however, to the development of a number of “crucial reforms to the superannuation industry”, Ms McNaughton believes.
“Five to 10 years down the track, when we really get pushed to the limits, they’ll have to say enough is enough,” she said.
“We’ll be talking more and more about an annuities market, allocated pensions and a deferred annuities market.”
Ms McNaughton said rapidly rising health costs may also see the government use a proportion of superannuation as part of a health budget.
“I don’t understand why the government can’t actually say to 20-year-olds today, “part of your nine per cent contribution will be syphoned off into a health budget,” she said.
The health fund could be invested within guidelines that are different from the rest of the member’s superannuation, according to Ms McNaughton.
She also said it could get to a situation where members will be mandated to take at least some of their superannuation as an annuity.
“I think we’ll have to get over that argument because otherwise the [super system] will be inoperable,” she said.
