Challenger Limited CEO Brian Benari said: “We welcome the FSI interim report as a bold and insightful analysis of the shortcomings of the Australian retirement system, and support its call for further discussion of the various proven and pragmatic reform options.
“It’s a no-nonsense report which should help put the retirement debate back on track. David Murray is simply telling it like it is. Our retirees are being failed by a system which is denying them what they want – a certain income for a long life in retirement.
“Too many retirees are left to manage longevity risk on their own. The complexity of this task means that they either under-spend and live too frugally, or overspend and fall back on the modest age pension.
“We agree that “despite a large body of evidence supporting the assertion that people value longevity risk protection” there are too few longevity products on offer. Removing the impediments to the issuance of deferred lifetime annuities (DLAs) should be seen as a logical first step.
“We expect DLAs to be popular among retirees. As Challenger’s revival of the lifetime annuity market has shown, retirees find properly-designed lifetime annuities attractive in a choice environment”, said Mr Benari.
Challenger’s Chairman, Retirement Income, Jeremy Cooper said: “David Murray is brutally honest in laying out the case for reform of our retirement system. After decades of compulsory saving for retirement, our retirees are abandoned at the point of making “critical, once in a lifetime decisions regarding when and how to draw down their savings over the remainder of their lives”.
“Anyone without a trusted financial adviser ends up motoring along the retirement spending highway without a speedometer or fuel gauge.
“The report also finds that “Australia is unusual in neither mandating nor encouraging the use of income streams with longevity protection in retirement”, added Mr Cooper.
“As observed, Australia is the only developed nation with a compulsory retirement saving, but no decumulation, structure. We are a laggard by world standards and are being trumped by Chile, Canada, Sweden, Denmark, Singapore, Israel, and the Netherlands. This needs to change.
“As the report notes, there exist reform options which can protect retirees’ incomes in retirement while maintaining the control and choice, which are so central to Australia’s investing culture.
“Challenger supports further debate on policy options spanning the use of tax and/or social security incentives, the inclusion of longevity products in default options, and measures to address the inconsistency between the forced saving and laissez-faire retirement spending phases of superannuation”.
