The recent Federal Budget failed to address the growing retirement savings issue of longevity risk, placing the onus on advisers, policy makers and product providers to examine the matter more closely, according to financial services group Asteron.
“Retirees are very much facing the risk of will their money last for as long as their retirement phase and what happens in that period where they are still alive and their money has run out,” head of technical services at Asteron Louise Biti said.
“We think it [the Budget] has left behind a generation of people we term as ‘Generation L’, the L standing for longevity, who are living longer, living healthier lives, but their money is not necessarily going to last them throughout their whole retirement period,” she added.
Australian Bureau of Statistics figures from December 2005 support Biti’s argument showing the demographic dubbed ‘Generation L’, people over the age of 85, had grown by 160 per cent during the past 20 years, in comparison to an overall general population rise of 29 per cent for the same period.
Asteron chief operating officer, corporate and distribution, Brett Himbury feels the situation emphasises the importance of the role of financial planners.
“If clients have needs that extend for a longer period of time and there is an increased likelihood that they’re going to run out of money, then there is an increased role for advisers to make sure that clients understand that issue, put plans in place, and in a disciplined and methodical way ensure those plans are implemented,” he said.
John Crosswell, chief operating officer retail with Asteron, believes both financial services product providers and policy makers need to work together to get on top of the situation.
“Most of the legislation is framed around today’s set of products. Those products aren’t necessarily geared to this problem. So it needs to get into the policy debate and then the industry generally needs to innovate around this,” he said.
To better understand the effect of ‘Generation L’, Asteron has commissioned the University of NSW to perform additional research into the phenomenon. Results of the study are expected in the coming weeks.
