Income products should be default option for retirees: Vamos

Income products should be the default option for retiree superannuation funds, according to the Association of Superannuation Funds of Australia (ASFA) chief Pauline Vamos.

An easy solution for the average, retirement-aged member who has a relationship with their fund is a product underpinned by a government-type bond that provides an income based on the member’s needs and the access they have to social security, Vamos said.

“What we want to see is defaults post retirement, that get most of the people in the right product and produce an income stream for them,” Vamos said.

However, understanding the social security part of a person’s retirement is vital, she said.

“With the way in which funds now provide advice, with the way in which they know members and have built a great relationship with members … they will be able to provide an informed default mechanism for many of their members that are going into retirement.”

Vamos believes products such as government bonds, infrastructure bonds and CPI-linked bonds can underpin a long-term retirement product.

“A lot of the policies and a lot of the products post retirement are insurance-type products. Superannuation funds are not life insurance companies and a lot of the products that life insurance companies deliver are quite necessarily expensive because of the capital that the life insurance companies need to maintain in order to support the product,” she said.

According to Vamos, over 80 per cent of super members are in a default accumulation fund.