Retirement drawdown rules need to be better designed to ensure retirees are not too conservative in their spending, Willis Towers Watson believes.
The advisory firm’s head of retirement solutions, Nick Callil said the aim of the overall retirement income system needed to encompass age pension and related benefits, and compulsory and voluntary superannuation, rather than just looking at superannuation, to promote better integration.
Callil said in an analysis titled ‘Superannuation is for spending’ that often the amount taken into retirement acted as a “capital base” to generate investment earnings which could be spent but often remained untouched.
“Often there is an assumption (generally unspoken) that assets individuals have accumulated for retirement are not to be drawn down during the retirement years,” he said.
However, a “spend the income” mindset for most retirees was unrealistic.
“Living off the interest income from term deposits or the dividend income emanating from a share portfolio sounds attractive but for most retirees (who have little in the way of income-producing assets outside superannuation) this sort of strategy is unlikely to produce an income they might regard as adequate,” he said.
To create a more comprehensive aim of retirement income Callil said the industry and government needed to look at:
The $300 billion fund has announced the development of a new flexible lifetime income option in partnership with TAL.
As regulators spur funds to focus on Australia’s ageing population and overseas players voice their interests, professionals expect a boost in innovative activity in super.
Over half of Australians hope to live to 100 years, according to MetLife, and 90 per cent believe retirement should be redefined to account for a longer lifespan.
Two actuaries have urged for an overhaul of the current retirement framework to better prepare Australians for the future and improve the accessibility of general financial advice.
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