Better super to manage retirement risk
The Financial System Inquiry’s (FSI) interim report recognises the failure of Australia’s current retirement income system to provide adequate choices to manage risk in retirement; a sentiment shared by the Institute of Public Accountants (IPA).
“Simply put, many retirees do not have adequate knowledge or guidance to support sound decisions of when and how to draw down their retirement savings to cater for the remaining years of their lives,” said IPA chief executive officer, Andrew Conway.
“We agree with the FSI report that many retirees do not know how to manage investments, inflation and longevity risks involved with retirement.
“The integrity of the Australian superannuation system would be enhanced if (a) incentives to draw superannuation benefits as a lump sum are reduced, and (b) incentives to adopt annuities and other pension products as the preferred retirement incomes are encouraged.
“While we support choice in superannuation decision making, we also believe there needs to be suitable incentives which encourage retirees into pension and annuity products. Annuities will generally provide for the longer term needs of retirees and protect against cost of living risks.
“People need to treat superannuation upon retirement as a long term financial stream, not a sudden windfall gain,” said Mr Conway.