The Actuaries Institute’s green paper ‘Options for an improved and integrated system of retirement’ has urged the importance of a retirement reform as a growing number of Australian retirees will face greater diversity when it comes to their wealth, health and longevity outcomes.
The structural reform would be expected to deliver a fairer retirement for all, the firm said, and should consider universal benefits, the means test, the treatment of the family home, and an end to tax concessions for large superfund balances.
This was particularly important at the time when more retirees would reach retirement age as renters and not having paid off their family home.
According to the paper, Australia’s current system faced some obvious shortcomings therefore the reform should be focused around taking a holistic approach to retirement, with an overarching objective to ensure that Australians could ‘confidently live their retirement years in dignity’.
For that, retirees would need to be guaranteed to have access to a regular income stream, savings to cover unexpected expenses and protection against longevity, the institute said in the report.
Additionally, the system would need to be simple to understand so that the retirees could make smart choices decisions even without seeking financial advice.
“The Actuaries Institute encourages the debate to start now,” the paper said.
“If it does not, Australians may lose the opportunity presented by the fiscal headroom of the declining Age Pension costs, and the lead time we have to prepare for known longer-term changes, such as those to patterns of home ownership and work, longevity and growing health and aged care costs.”
In particular, the options for a new reform should focus on:
- Simplifying the Age Pension which would be integrated with superannuation and aged care
- Addressing anomalies created from exempting the family homes from Age Pension means testing
- Reflect changes in longevity
- Setting targets for government expenditure for support in retirement
- Addressing tax and aged care funding anomalies
- Co- ordinating policies for support in retirement
“There are a number of known longer-term trends: an ageing population, a maturing superannuation system, changing patterns of home ownership and work, a growing dispersion of wealth and health, and growing private costs for health and aged care,” Actuaries Institute’s president, Nicolette Rubinsztein, summed up.
“All of these aggravate the inconsistencies that stem from a lack of appropriate integration between the various components and undermine the potential area for a dignified life for all retirees.”