Baby boomer super: save it or squander it
The financial services industry will need to become more innovative in developing products for retiring baby boomers according to AMP Financial Services managing director Andrew Mohl.
"The ideal offering could be an income-paying product with longevity and inflation insurance properties that does not cut too deeply into consumption and which leaves the retiree with some capital discretion to cope with contingencies," he says.
Mohl made the comments while speaking at a Macquarie University Applied Finance Seminar earlier today and says Australia is on a steep learning curve on how to move from accumulating assets for retirement to managing them so they provide ongoing returns for retirees.
Mohl says that Australia is more advanced in the industrialised world in accumulating and managing assets for retirement and is in a position to show the world how it can be done successfully. However, this will hinge on whether the Government, the community and the private sector can get their act together on retirement.
"Despite its best efforts, the baby boom generation is growing old. Our boomers start moving past 55 in 2001; the age at which they can access their super and consider retirement - that's access to around $140 billion in super over the next decade from a total current base of $470 billion," Mohl says.
Australia is in the box seat to either get its retirement financing right or risk loosing the lot according to Mohl.
He says Australian super funds will grow to $1.7 trillion in the next 20 years, so to fail to plan properly for the baby boomers entering retirement could see the "greatest capital squanderings in economic history". Countries that get it wrong could have to deal with political and economic instability for years.
To avoid some of these problems, Mohl says the Government should review its retirement incomes policy, enhance the incentives for retirees to use income streams, disentangle age pensions from health care benefits and educate potential retirees about the benefits of income streams.
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