The Actuaries Institute today said the Financial System inquiry’s (FSI) recommendations would significantly improve the living standards of millions of retirees, if adopted by the Government.
President of the Actuaries Institute, Daniel Smith, said: “Australians are living longer and so it is imperative that we have a superannuation system in place that manages the community’s growing longevity risk.
As a result of a special Actuaries Institute-FSI working group, the FSI recommends establishing a pre-selected retirement default system featuring a comprehensive income product for retirement (CIPR) that provides a broad portfolio of product and investment options.
“This will ensure retirees have access to strategies which will protect retirees against the many risks they bear, including liquidity, longevity and inflation. This will deliver greater income security and protection throughout their retirement,” Mr Smith said.
”David Murray and his Committee have recognised the need for our superannuation system to shift focus from wealth accumulation to the development of retirement income streams that can last throughout a retiree’s life.
“This is particularly important, given that changing demographics in Australia over the next few decades will make it more difficult for Governments to finance a desirable standard of living during retirement through the Age Pension system. For example, there are currently 4.2 people of working age for every person aged 65 and over. This will reduce to 2.7 over the next 30 years.”
The Institute has been a strong advocate for tackling the longevity risk issue. “Our ageing population faces a growing risk of outliving its retirement savings which puts pressure on the Government’s Budget through increased pension payments. The Murray recommendations aim to help relieve that pressure,” Mr Smith said.
CEO of the Actuaries Institute, David Bell, said that the actuarial profession also supported FSI recommendations to increasing private access to public data to improve public policy development and also to encourage development of a wider range of products with income guarantees and risk management features that could benefit retirees.
“Product development is currently constrained by regulatory impediments. The FSI report supports the review of retirement income regulation to remove current barriers and stimulate innovation in the retirement income segment.
“The Institute supports the FSI’s calls for broad political agreement to establish an agreed set of superannuation objectives to guide the sustainable financing of our ageing population,” Mr Bell said.
