Fix retirement incomes means testing or face policy failure
The Federal Government must fix assets and incomes tests around retirement incomes or face the risk that its proposals to develop a MyRetirement product will flounder, according to the Actuaries Institute.
The institute has told the Government that unless it makes a determination on how such products are treated under the age pension means test, product development will not progress and innovation will stall.
The head of the Actuaries Institute’s Retirement Strategy Group and head of Willis Towers Watson Australasia, Andrew Boal said that if the Government failed to move on the issue and therefore failed to get the broad framework right, there was little chance of helping retirees to deal with longevity risk in retirement.
“There is an opportunity to make the retirement system more efficient, to establish the framework in which we can then debate all other post-retirement issues,” Boal said. “But the industry must first know how MyRetirement products will be dealt with under the Age Pension means tests.”
He pointed to the fact that the aim of MyRetirement products was to help retirees’ lift their living standards by addressing longevity risk and that risk pooling could help lift standard.
But Boal said there were very few markets where pooled mortality products were taken up in great numbers without some form of incentive, or compulsion.
He said that while the Government had removed some of barriers to the development of innovative retirement products by extending the tax exemption on earnings during retirement to products such as deferred lifetime and annuities and group self-annuitisation products, there had been no policy announcement relating to the means test treatment of the products.
“It is the missing piece in the jigsaw puzzle to improve the efficiency of the superannuation system,” Boal said. “Without some sort of beneficial ruling, it may not be commercially viable for providers to develop the sort of innovative longevity protection products needed to help Australians lead a better life in retirement.”
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