Retirement review too narrow -AIST

The Treasury's review of Retirement Income Stream Sustainability is too narrow and should, properly, look at the sustainability of the underlying tax settings, according to the Australian Institute of Superannuation Trustees (AIST).

The AIST has used its submission to the Treasury inquiry to argue that such an expansion of the inquiry is warranted in circumstances where questions may ultimately arise over whether there is any real advantage in retirement incomes steams over amounts invested in competing non-superannuation investments.

The submission also questioned the sustainability of superannuation restrictions and whether they formed a barrier to retirement savings, and the adequacy of social security arrangements, and "what is accomplished by means testing parity between non-superannuation and superannuation products".

The submission also pointed to the issues associated with longevity risk "as part of a larger basket of financial risks which include greater exploration of investment risks, as well as mortality risk".

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The AIST submission said that it believed that there existed no single answer to which type of income stream product would enable retirees to better manage risks in the retirement phase.

The submission also strongly disputed a claim contained in the Treasury paper that "…a defining feature of account-based products is that the holder bears the full extent of the risks— in particular, investment and longevity risks—associated with the product…"

"This is a conclusion upon which most of the discussion in this paper rests," it said.

However the AIST submission said that the conclusion that an investor in an account-based retirement income stream bears the full extent of risks was "erroneous".

"The assumption…that there is a magic product that addresses both longevity risk and the many competing investment risks is fanciful," the submission said.