ONE of the greatest challenges facing new retirees is how best to manage their long-awaited superannuation funds to provide a comfortable living while ensuring the money lasts for as long as is needed.
With ever-lengthening life spans, this may be a long time.
While super funds put most of their focus on the accumulation phase, there is little help for non-defined benefit members who face the challenging post-retirement quagmire of retirement products.
To help counter this shortfall, the federal government has released a discussion paper outlining a proposed framework for the retirement phase of the super system.
The paper is a response to the Financial Systems Inquiry (the Murray inquiry), which recommended the introduction of products titled Comprehensive Income Products for Retirement (CIPR) but which the government is proposing to rename My Retirement Products as a more consumer-friendly and meaningful label.
Last year’s Intergenerational Report projected that by 2054-55 the number of Australians aged 65-plus will more than double, with one in every 1000 people aged over 100.
Under the present super system, many retirees will run of retirement savings long before they die, leaving them reliant on the government pension purse.
Under the proposed system, super funds would pre-select a CIPR for members that would include a longevity risk management component, to ensure income for life.
On retirement, the member could take the fund-selected CIPR or choose another option.
“As Australians enjoy longer and healthier lives and the super system matures, it is important we get the settings for our superannuation system right,” said Revenue and Financial Services Minister Kelly O’Dwyer.
“This is an important reform that will help lift the living standards and choices of older Australians. There are seldom other reforms that offer such large potential increases in income without a cost to taxpayers.”
Ms Dwyer said the Murray inquiry had noted that incomes from more innovative retirement income products could be 15-30 per cent higher than those of the current typical strategy of drawing the minimum amount from an account-based pension.
The closing date for written submissions is April 28.
- The discussion paper is available from Treasury (phone 1800-020-008) or on the Treasury consultation hub - consult.treasury.gov.au