The Financial System Inquiry’s interim report is right to criticise the current retirement income system as it lacks choices to manage risk in retirement, an accountant body said.
The Institute of Public Accountants (IPA) said many retirees do not know how to manage investments, inflation and the longevity risks that come with retirement.
“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,” IPA CEO Andrew Conway said.
He said the super system would improve if inducements to draw super benefits as a lump sum were clamped down, and incentives to take on annuities and other pension products for retirement income were urged.
“People need to treat superannuation upon retirement as a long term financial stream, not a sudden windfall gain,” Conway said.
He added annuities will shield retirees against cost of living risks and will be a source of income for the long term.