Research by the Financial Services Council (FSC) shows has found policy reform focused on improving how Australians spend their superannuation savings would boost retirement incomes by 10 per cent each year, or by $397 billion by 2050.
NMG Consulting’s research for the FSC offers a road map for a more efficient superannuation drawdown phase that would raise living standards in retirement for consumers, reduce bequests, and take long-term pressure off the federal budget.
The road map draws on global approaches to the retirement system and identifies a full package of reforms centred around action in three areas:
- To help people see and use superannuation primarily for spending during retirement, including making safe financial advice more affordable and changing consumer disclosure rules to have a more drawdown focus;
- To remove regulatory barriers to innovative, new retirement income products, including facilitating a simple process for moving consumers out of closed legacy products, reviewing the flexibility of prudential capital requirements and introducing a disclosure regime to allow consumers to compare retirement product features and fees easily; and
- To help people take control of their superannuation by simplifying how it interacts with other parts of the retirement system like the aged pension, aged care and health care.
The research also found:
- Around 100,000 more people would draw down an extra $10,000 in increased retirement incomes per individual every year on average;
- The amount of superannuation benefits left each year as a bequest would be halved by 2060, ensuring superannuation is primarily used up as income for retirement; and
- Total system assets would be 12 per cent or $1.6 trillion lower by 2060, with retirement phase assets representing 30 per cent, rather than 40 per cent, of total assets.
Treasury estimates from the Federal Budget October 2022-23 Papers forecast continued annual budget deficits of 1.8-2.0 per cent of GDP over 2023-2026 and 1.9 per cent of GDP in 2032-33.