Rice Warner submission to the Financial System Inquiry – Retirement income solutions

Rice Warner is pleased to provide this submission to the Financial System Inquiry (FSI).

Our submission focuses on retirement incomes as we broadly agree with the observations in the interim report of the FSI that:

– The retirement phase of superannuation is underdeveloped and does not meet the risk management needs of many retirees.
– There are regulatory and other policy impediments to developing income products with risk management features that could benefit retirees.

We consider much work needs to be done by the superannuation industry on retirement strategies. Superannuation funds have an immediate need to develop suitable strategies to cater for the baby-boomer generation which has already begun to enter retirement.

We have been able to analyse what currently happens to members as they enter retirement based on our research and insights. From this, we have formed a view on what needs to be done to optimise retirement incomes and moderate the many risks facing retirees.

As it is not possible to consider retirement incomes without covering tax and social security, we have also included some commentary about improving tax equity and efficiency.

Finally, we have made some comments about leverage in superannuation funds as it is relevant to providing a sound retirement income for members.

This report covers the following subject matter:
– Problems with current strategies, including retirement myths
– Constructing a suitable default retirement solution
– Making long-term annuities more attractive
– Tax and social security
– Leverage in superannuation