Whole-of-life approach urged on retirement system

The Association of Superannuation Funds of Australia (ASFA) has canvassed the establishment of a default MyPension product as part of a broader answer to developing a sustainable retirement incomes system in Australia.

In a submission to the ‘Review of retirement income stream regulation', the organisation outlined five principles under which it claimed the retirement income system should be designed to meet both fiscal and social objectives, with its chief executive, Pauline Vamos, saying the starting point should be a system that had measurable goals that are agreed to and monitored.

"This will guide policymakers towards decisions about how to adjust the system to accommodate the changing nature of Australia's population, and also give the community, governments and the industry a yardstick against which they can measure its success," she said.

Vamos said the second principle ASFA was recommending was the taking of a ‘whole-of-life' approach to superannuation and retirement, in order to make the system simple, easy to navigate and to allow for continuity and stability in retirement planning.

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"This includes streamlining the process from moving from accumulation to drawdown, developing products that have greater flexibility in their design and encouraging people to take an income stream that stretches across the whole of their retirement," she said. "For people who are largely disengaged with their super, this could be in the form of a default ‘MyPension', which offers an allocated pension alongside the option to invest in a product that offers longevity protection."

The ASFA submission also argued that the retirement income system should also be integrated with, and consistent with, other interdependent government policies.

"Innovation is more likely to occur if there is a unified approach to the regulation of retirement income products across the relevant government departments," Vamos said. "In order to allow innovation to flourish, regulation should be structured around principles rather than specific product features."

She said retirement products in the future would likely be a combination of income streams, account management and longevity protection, and might be part of pooled products or individually managed accounts.

"This is why it's crucial that regulation is framed to accommodate innovation in product design that reflects the objective of providing regular incomes streams over retirement, rather than specifying detailed product features," Vamos said.