Industry giant’s super idea
Call for retirees to be able to integrate income streams, pension
AustralianSuper is calling on the Albanese government to combine accumulation and retirement accounts into a single superannuation “account for life” that would also incorporate the age pension into the $3.6 trillion pool of super savings and let retirees recontribute while drawing an income.
Responding to reforms proposed to improve the experience of retirees and encourage better use of super savings, the nation’s largest pension fund has also warned against “mandatory national default” longevity products such as annuities.
“While we believe longevity products have an important role to play and can be a good supplement to a range of retirement pathways, particularly for people with higher balances, they are not the solution for everyone,” AustralianSuper chief executive Paul Schroder said.
“A mandatory national default product risks increasing complexity, stifling innovation and limiting the ability of funds to tailor their offering to meet specific member needs and preferences.”
The government paper in December highlighted the underdevelopment of the retirement phase of Australia’s super system – the world’s fourth largest pool of retirement savings – and made proposals such as improving information, simplifying the system, and empowering funds to offer better options.
With 2.5 million workers due to retire in the next decade, there are concerns about a lack of products designed for optimal outcomes amid growing concerns among retirees about outliving their savings.
That paper said “there was support” for a proposed default income product in retirement recommended by the Financial System Inquiry in 2014, where retirees would be automatically rolled into a pension account paired with a “pooled” longevity product that provides regular income and manages longevity risk – the chance that people live longer than expected and outlive their retirement savings.
This would help people manage risks and spend more of their super savings to accommodate better living standards in retirement, after spending decades accumulating super.
But in its submission, Australian Super says the government’s Age Pension is already the “default longevity product” in this country. Therefore, the priority should be removing barriers to accessing that for the members who need it the most.
“We recommend that, where a member requests it, superannuation funds should be able to provide integration of superannuation income streams with Age Pension income streams,” the submission says. It said the sole-purpose test prevents it from charging members collectively or using an intra-fund to finance the development of “administrative capabilities” to be able to apply for the Age Pension on behalf of eligible members, on request.
“Legislative change would be required to facilitate this,” the submission says.
This change would result in significantly more Australians accessing their full Age Pension benefits compared to the current situation, where only 44 per cent claim it as soon as they’re eligible, inadvertently forfeiting their full entitlements.