The terminology of retirement income needs a change as people associate it taxable income, rather than spending money for their retirement.
Speaking at the Post Retirement Australia conference, David Knox, Mercer senior actuary, said it was an “unfortunate” term.
“When you talk about income, most people think income is taxable – it’s investment income, wages or salaries,” Knox said.
“Actually, what we have here is a pot of money that is not taxable – presuming it is in the pension phase – you can draw it down, it’s not paying any tax on investment income, you pay no tax on the drawdown – that’s not income.
“What is that? Let’s find a better term to express it. I’m not sure that ‘spending money’ is the right term as that sounds like pocket money, but our whole term for retirement income is actually misleading.
“We need to express the fact that as people move out of the workforce into their retirement years, here’s support from the Government, from your super fund and other assets to have a good lifestyle.”
Knox said this ultimately came back to the whole retirement income system and what needed to be done to improve it.
“We’ve talked about several pillars and super is only one of those pillars,” Knox said.
“What we want people to do after they stop working – whatever age that is – is to maintain a standard of living that is broadly consistent with what they had before and how do we deliver that? We haven’t answered that question.
“We haven’t even agreed to that as an objective, but if we take that as an objective it goes beyond super and it includes the Age Pension.
“It includes the Age Pension and the Government saying ‘we will be there at the backend for you with the Age Pension and aged care provision’ therefore, you can spend your capital and maybe even part of your house even though there is reluctance to do that.”