The Government should extend MySuper to include default pension options that provide access to capital in earlier retirement and an income stream in later years, the Actuaries Institute has proposed.
The institute said superannuation funds with a MySuper option should be required to transition default members into an "intelligent post-retirement default product".
Actuaries Institute chief executive Melinda Howes said it made sense to give retirees – who faced more risks than pre-retirees – a safety net by extending the default system to post-retirement.
Government should also remove the legislative and regulatory barriers to annuity products to encourage product innovation and allow insurers to compete in the post-retirement space, the institute said in a white paper entitled Australia's Longevity Tsunami – what should we do?
Legislative barriers to lifetime, deferred lifetime and variable annuities should be removed and replaced with more flexible infrastructure, it said.
Howes said regulations on annuity products were out of date and did not allow the flexibility needed to promote innovation or competition.
"What we're really trying to achieve here is a deeper and more developed post-retirement products market. At the moment when people retire they don't have a lot of choice as to where their money goes," she said.
Although it said retirees should not be compelled to invest in a certain product type, the institute argued the Government should provide incentives to choose an income-based product and implement disincentives on lump sum withdrawals.
It proposed a cap on the lump sum amounts high net retirees could withdraw from their retirement savings, and the need to draw down on capital over the long term.
The institute said the Government should link the preservation age to the aged pension age, possibly three to five years prior to it, to allow people to phase into retirement.
It said the aged pension should then be linked to life expectancies, while impediments to older Australians working, such as the super contributions cap and means test, should be removed.
Howes said all of the proposals were viable but some needed longer lead times.
