CFS questions 'lump sum culture' myth

Taylee Lewis
— 1 minute read

The perception that Australians prefer lump sums to income streams when withdrawing from superannuation is inaccurate, says new research from Colonial First State and Rice Warner.

According to the recently launched CFS Income Stream Index, more than $80 of every $100 paid as a retirement benefit is taken as a pension.

Colonial First State executive general manager Linda Elkins said: “This analysis suggests that Australians’ reliance on lump sum in super is an exaggeration.


“This is a sign of a maturing system, where – through good education and advice – people are becoming more and more self-reliant.”

According to the index, in 2014, only 10 per cent of assets were taken as lump sums, 7 per cent as partial lump sums and the remaining 83 per cent rolled over to a pension-based account.

Ms Elkins said the trend supports the principles outlined in the Financial Services Inquiry that balance the desire to increase systematic efficiency in providing retirement incomes with a degree of individual freedom.

Rice Warner chief executive and author of the report, Michael Rice, said there is a strong preference for income streams as balances grow.

“We estimate that as the superannuation system matures, 96 per cent of all retirement assets will be taken as income streams by 2025,” Mr Rice said.

“The question is not so much about whether Australians use income stream products in retirement but whether they are using the right income streams.”

The report found that the majority of funds rolled over into a pension have a balance of $100,000-$200,000.

Self-manager super fund members are also more likely to convert their super into a pension than members of industry and retail funds.


CFS questions 'lump sum culture' myth
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