Australians’ rising preference for income streams over lump sums in retirement highlights the need for innovative comprehensive income products and a review of all parts of the retirement income system.
Such is the view of a non-partisan body of academic and policy experts, which said current retirement solutions lacked flexibility to deal with different life circumstances.
The Committee for Sustainable Retirement Incomes (CSRI) responded to an Australian Bureau of Statistic (ABS) analysis released last week, which said almost 1.2 million people were receiving an income stream from their super in 2013/14, while 25 per cent of those over 65 were on income streams, rising from 20 per cent in the past decade.
Government reforms would need to look beyond the affordability of tax concessions and look at the retirement income system as a whole.
CSRI executive director, Patricia Pascuzzo, said: “This is a complex challenge as it involves the intersection of the tax, super, age pension and age care systems”.
“The risk is that this complexity adds significant cost, favouring sophisticated, well-informed investors over the less financially literate with fewer resources.”
The ABS also noted the average value of super balances for males aged 55-64 in 2013/14 was $322,000, while the average balance for females stood at $180,000.
“There are no simple answers to the superannuation gender gap. A range of measures is needed if we are to make an appreciable difference to women’s security in retirement,” Pascuzzo said.
The CSRI noted the Federal Budget in May included major reforms to better target superannuation tax concessions in order to make the system more fiscally sustainable, including legislating an income goal for super.
However, it said fiscal sustainability would not solve every issue. The system also needed innovative compressive income products that tackled longevity risk and suited different life circumstances.
